Canada’s housing starts surge in July, strong demand to support activity in near term

Canada’s housing starts rose sharply to 245.6k units in July, rising from 212.1k units in June. Excluding monthly noise, the six-month moving average rose to 204.4k units, rising from 199.8k units in June. Today’s data was above expectations of a modest pullback to 205k units in July.

July’s rise was driven mainly by the multi-starts category, where urban starts rose 18.8 percent sequentially to 184.4k units. Urban single-detached starts rose 12.3 percent to 47.6k units. The strength in homebuilding was broad based throughout all regions; however, it was surprisingly led by the Prairies and Atlantic Canada.

Ontario saw another strong outturn, with starts rising to 84.7k units in July, rising from 78.4k units in June. Homebuilding activity in Quebec rose to 63.8k units. Activity in B.C. also rose to 42.4k units. The Prairie regions recorded starts rise to 38k units in July, up from 25.7k in June. Gains were centered in Alberta and Saskatchewan. Starts in Atlantic Canada came in solid at 16.8k units, up from 7.9k units in June. This was driven by strength in Nova Scotia and New Brunswick.

“Strong housing demand continues to drive this resilience, supported in part by the impacts of past increases in population growth and demand more broadly, as well as historically low borrowing rates. These forces should continue to support housing activity in the near term. However, as these forces wane, a slowdown in population growth (driven by lower immigration) will be a key downside risk to housing activity”, said TD Economics in a research report.