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Home construction rose 1.3% in April as Canada’s real estate market continued to show signs of recovery
Home construction rose 1.3% in April as Canada’s real estate market continued to show signs of recovery.
Canada Mortgage and Housing Corp. said Monday housing starts rose by a seasonally adjusted annual rate of 201,700 units last month, up from a revised 199,200 units in March. The March number was previously estimated at 197,300 units.
Economists had expected starts to increase by around 205,000 units in April.
“Higher multiple starts were nearly offset by a decline in single starts and rural area starts in April, said Bob Dugan, CMHC’s chief economist. “As a result, total housing starts edged higher in April.”
Urban starts increased by 5.1% to 182,500 units on a seasonally adjusted annual rate in April. Multiple-unit construction was up 27.2% to 98,600, while single units fell 12.7% to 83,900.
In British Columbia, urban construction rose 16.4% and the Prairie region posted a 6.7% gain. Ontario was up 4.5% and Quebec rose 1.1%, while Atlantic Canada declined 3.3%.
“This was only the second time that the pace of housing starts has breached the 200K-units barrier since November 2008,” said Millan Mulraine, senior strategist at TD Securities.
Rural housing starts totalled 19,200 units in April, down from 25,600 the previous month.
“On the whole, the report underscores the strong recovery in Canadian home building activity, and the Canadian housing market more generally, as favourable buying conditions continue to spur housing demand,” Mr. Mulraine said.
“However, in the coming months we expect the pace of activity to moderate as higher interest rates and home prices, and tighter mortgage rules temper demand.”
Single starts tumbled last month, while survey shows fewer people plan to buy
Tavia Grant – Globe and Mail
Canadian housing activity continues at a bustling pace, but there are glimmers the market is set to cool.
Housing starts rose at an annualized pace of 201,700 units last month, Canada Mortgage and Housing Corp. said Monday, though gains in multi-unit construction masked the first sizable slide in single-unit activity in a year.
A separate survey showed fewer Canadians have firm plans to buy a house. And resale activity is already slowing.
Most economists – including Bank of Canada officials – expect the housing market to slow from its torrid pace. Rising interest rates, tighter mortgage rules and a new sales tax in Ontario and British Columbia will likely dampen activity in the second half of this year. And though monthly numbers – especially in the building sector – can be volatile, economists said the drop in single-family homes suggests the sector is already softening.
“Is this a signal that single-market construction activity will ease going forward? Probably,” said Yanick Desnoyers, assistant chief economist at National Bank Financial.
Quarterly growth in the housing sector is cooling “rapidly,” and he expects the sector will actually have a negative impact on Canada’s economy next year.
Higher interest rates are a chief reason for the expected slowdown. The Bank of Canada is widely expected to boost its key lending rate next month. “The sensitivity of Canadian households to interest-rate hikes is very, very high right now” because debt levels of many households have far outstripped personal-income growth, Mr. Desnoyers said.
The resale market, meantime, also points to some moderation as activity has eased from record levels and more supply is coming into the market, the Canadian Real Estate Association said in March.
Canadians seem set to take a breather. Just 3.4 per cent say they are very likely to buy a house in the next 12 months, “suggesting activity may slow during the remainder of this year,” a Canadian Association of Accredited Mortgage Professionals report said Monday.
To gauge the effect of rising rates, the association simulated the impact of mortgage-rate increases up to 5.25 per cent. The current average mortgage rate is 4.02 per cent among households that locked in fixed rates during the past year.
It found that about 375,000 mortgage holders “are already challenged” by their current payments, and an additional 475,000 might be in trouble if their rate hits 5.25 per cent.
Mortgage rates have already risen, though several banks – including Royal Bank of Canada on Monday– trimmed some rates in recent days. RBC’s five-year closed rate is now 6.10 per cent – still higher than several months ago.
CMHC’s report showed multiple starts rose 27.2 per cent. Single urban starts tumbled 12.7 per cent – the first big drop since last April.
Starts climbed 16.4 per cent in British Columbia, 6.7 per cent in the Prairie region, 4.5 per cent in Ontario, and 1.1 per cent in Quebec. They fell 3.3 per cent in Atlantic Canada. The country needs a pace of about 175,000 to 185,000 units a year to keep up with demographics, economists estimate.
Canadian mortgage numbers
5.55 million – Number of mortgages in Canada, out of a total 9.3 million homeowners in the country.
$138,000 – Average outstanding principal.
$770 billion – Outstanding mortgage principal on primary residences in Canada.
0.45% – Portion of Canadian mortgages in arrears as of February.
Tavia Grant – Globe and Mail
Canadian housing starts cooled for the first time this year in March as condominium construction eased.
Housing starts fell 1.5% last month to 197,300 units on a seasonally adjusted annual basis as builders broke ground on fewer multiple-unit dwellings, Canada Mortgage and Housing Corp. said.
National starts have been generally rising in recent months as Canada’s real estate market steams ahead. While last month’s reading was little changed, several factors suggest the market remains strong: February’s revised numbers show starts climbed above the 200,000 mark for the first time since October, 2008. And single home construction hit a four-year high in March.
Multi-unit construction, meantime, tends to be volatile, with the March drop following a month-earlier increase.
The pace of housing starts – and broader real estate activity – will likely ease in the second half of this year as mortgage rates rise and new tax regimes and regulations dampen the market, economists said.
“It’s a bit hard to believe starts will hold at this level,” said Pascal Gauthier, economist at Toronto-Dominion Bank.
Canada requires a pace of housing starts of about 175,000 to 185,000 to keep up with demographic demand, economists estimate.
In March, urban multiple starts fell 15.2% while single-family starts grew 6.9%.
The findings echo a report last week, showing building permits eased due to a lull in multiple-unit activity. Building permits fell for the second month in a row in February, sliding 0.5% in the month.
Single starts are now running at a four-year high. “Activity in this sector is now up 126% from the recession low and … has seen 11 consecutive monthly gains since bottoming in April last year,” Bank of Montreal economist Robert Kavcic said.
Starts fell 16.3% in British Columbia, 15.5% in Ontario, and 8% in Atlantic Canada. They rose 13.5% in Quebec and 7.3% in the Prairies.
Rural starts were estimated at 22,100 units in March.
Levels in January and February were revised upward. In January, they rose 7.5% to 189,000, and in February, the new reading shows they rose 6% to 200,400 units.