The annual pace of housing starts posted its strongest month-over-month increase in a decade in June, slightly reversing the downward trend seen in recent months.
The Canada Mortgage and Housing Corporation (CMHC) pointed out Tuesday that the seasonally adjusted annual rate of housing starts in Canada totaled 281,373 units in June, compared to 200,018 in May, “which represents the largest monthly change in annualized seasonally adjusted data over the last 10 years”. The national housing agency attributed it to a spike in activity on the side of collective housing projects, a more volatile category.
In Quebec, the increase amounted to 18 per cent, from one month to the next, for a total of 25,049 housing starts.
Nationally, the annual pace of housing starts in urban centers rose 46% to 262,815 units in June. In these centres, the rate of multi-family housing starts increased by 59% to reach 219,914 units, while that of single-detached housing starts increased by 3% to reach 42,901 units.
“However, year-to-date housing starts in the first half of 2023 were 8% lower than in the same period of 2022. The decline was due to high interest rates that continue to weigh on housing starts due to the increase in borrowing costs,” explained Bob Dugan, Chief Economist at CMHC.
The annual rate of housing starts in Vancouver in June increased by 71% compared to May, while that observed in Toronto doubled its rate of the previous month.
The Montreal region also recorded an increase, but less marked than that of the other two, namely 8%. All three census metropolitan areas saw increases in both single-detached and multi-unit housing starts.
In rural areas, CMHC estimated the annual pace of housing starts at 18,558 units in June.
The downward trend in housing starts observed in recent months also reversed slightly due to a significant increase in the actual number of housing starts in June.
The weight of interest rates
The six-month moving average of the annual rate of housing starts, which assesses the longer-term trend, was 234,974 units in June, compared to 229,520 units in May, an increase of 2.4%.
The rise reverses a steady decline that began in November as rising interest rates impacted construction, but not enough to shake its long-term trend, CMHC said.
The drop in housing starts in the first half compared to a year ago comes despite a CMHC projection that Canada will need to significantly increase supply to deal with the housing crisis.
The agency predicted in June 2022 that, based on the pace of construction at the time, the country would need to build 3.5 million additional homes by 2030 on top of what was already planned, in order to be able to restore affordability.
Generally down
TD Bank economist Marc Ercolao points out that while June’s jump was impressive, the six-month moving average continues to decline slightly.
“One month is not enough to reverse the sector’s long-standing downward trend,” he said in a note.
The slowdown in home sales continued to fuel the decline in construction activity, which, despite rising in the second quarter, is expected to decline going forward, Ercolao said.
“This boom is expected to be short-lived and as high interest rates continue to ripple through the economy, home construction will dampen residential investment in the coming quarters. »
With The duty