Canada’s new home starts fall in October, likely to decline further next year

Canada’s new home starts dropped in October from the strong figures recorded in September. Housing starts fell to 193,000 annualized units from September’s 219,000 unit pace. But the six-month average rose slightly to 199.9k units. Most of the decline was driven from the multi-unit sector that dropped 15 percent in the month. In the meantime, single-detached starts dropped 5 percent. Both came off strong double digit gains in September, noted TD Economics.

Region wise, new homebuilding activity dropped almost throughout the board, with Ontario being the only region to record a rise in October. Ontario registered a 20 percent rise. This is just the opposite of the scenario seen in September, when Ontario was the only province that recorded a drop in starts.

Canada’s housing starts, on a trend basis, have been quite stable in the last year at close to 200,000 units. While this rate has possibly been appropriate given demographics, it is not expected to be sustained for much longer, said TD Economics.

The recently introduced new mortgage and tax regulations by the federal government is likely to take certain steam out of home sales, especially in Ontario and British Columbia that have accounted for the huge gains so far in 2016. This is likely to filter through to homebuilding activity too. Indeed, housing starts in Ontario and British Columbia are expected to record major declined in 2017 following strong growth in 2016.

“As such, we expect housing starts to slide to an average of roughly 180k units in 2017, from an estimated 194k units this year”, added TD Economics.