Canada’s housing starts fall in April, likely to settle closer to 200,000 in 2017 – TD Economics

Canada’s housing starts dropped in April. They fell almost 40,000 to 214,000 annualized units in April, almost on par with expectations for a 215,000 print from a slightly downwardly revised March number. The strong reading in April puts the six-month moving average to 214,000, the most rapid pace seen since the end of 2012.

The drop was widespread, with both the highly volatile multifamily units and single family construction falling in the month. Region wise, the drops were centred in Ontario, the Prairies and Quebec, with starts remaining flat in British Columbia. Housing starts almost doubled in Atlantic Canada as a sharp rise in Nova Scotia more than countered the drops elsewhere in the region. Housing starts dropped by 11,000 in Toronto to 41k, while starts remained almost the same in Vancouver at 100k.

Following a surprisingly sharp rise in March, a decline was expected in April and materialized alongside expectations. However, despite the declines, housing starts continue to be on a strong course, with the print for April staying above the six-month moving average and both singles and multiples well above their levels last year, noted TD Economics.

The falls throughout Central Canada and the Prairies came in as anticipated, given the rise in the activity in the recent months, with homebuilding slowly trending towards its trend pace underpinned by demographics. Furthermore, the print in Ontario might have been affected as builders digested the 20 April Ontario Fair Housing Plan announcement.

“Ultimately, we expect housing starts in Canada to continue along this trajectory and settle closer to 200k later this year with Toronto's market and its response to the new rules being the main risk to this outlook”, stated TD Economics.

Price growth is expected to ease; however, it is unlikely to considerably impact housing starts in the near-term.