Canadian Housing Starts Show Continued Resilience in July

Canadian Housing Starts Show Continued Resilience in July
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Canadian housing starts jumped to 245.6k (annualized) units in July, up from 212.1k units in June. Stripping away monthly noise, the 6-month moving average increased to 204.4k units, up from 199.8k units in June. The release came in above consensus expectations of a modest pullback to 205k units in July.

July’s increase was driven primarily by the multi-starts category, where urban starts were up 18.8% m/m to 184.4k units. Urban single-detached starts increased 12.3% to 47.6k units.

The strength in homebuilding was widespread across all regions, but was, surprisingly, led by the Prairies and Atlantic Canada:

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  • Ontario clocked in another strong outturn, with starts increasing to 84.7k units in July, up from 78.4k units in June.
  • Homebuilding activity in Quebec edged up to 63.8k units (up from 61.2k in June).
  • Activity in B.C. also increased (to 42.4k units, up from 38.8k in June).
  • The Prairie regions saw starts rise to 38k units in July, up from 25.7k in June. Gains were centered in Alberta (+7.8k to 22.7k units) and Saskatchewan (+5.6k to 8.2k units).
  • Starts in Atlantic Canada came in at a strong 16.8k units, up from 7.9k units in June. This was driven by strength in Nova Scotia (+ 5.3k units to 7.9k) and New Brunswick (+ 4.7k units to 7.2k).

Key Implications

Canadian housing data continues to defy expectations. July’s print reinforces the resilience of homebuilding activity (and housing market activity more broadly) despite the unprecedented, pandemic-induced hit to the economy. Indeed, aside from the complete pause in Quebec in April due to restrictions on non-essential economic activity, homebuilding has shown only a muted response to COVID-19, swiftly returning to pre-pandemic levels. This stands in contrast with more severe declines and more drawn-out recoveries seen in other industries.

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. Additionally, the strong level of activity seen in the Prairies (where Alberta and Saskatchewan suffer from an overhang of units since the 2014 oil price shock) and Atlantic Canada (where strong immigration has been a key driver supporting housing activity) is unlikely to be sustained.



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