Housing starts fall below 200k mark in December
- New housing construction dipped slightly in December, with starts clocking in at 197.3k (annualized) units. On a month-on-month basis, starts dropped 3.4% m/m from November. The print disappointed market expectations that called for 210.5k starts in December.
- The decline was concentrated in multi-family starts, which dropped 5.1% 141.0k units. However, they remain elevated on a trend basis. Meanwhile, single-detached starts ended the year on a positive note, edging 1.1% higher to 56.3k units.
- Regionally, the decline in starts was broad-based, with construction lower in six of 10 provinces. Homebuilding dropped by the most in Ontario, with starts falling by 7.6k to 57.4k units, marking the softest level since May. Dropping construction of apartment buildings drove Ontario's decline, with the likely culprit being past declines in pre-construction condo sales. Starts also were much lower in Quebec (-7.1k units to 37.4k), joining a list of indicators pointing to slower fourth quarter growth in the province. Starts also fell by 5.0k in B.C., concentrated in regions outside of Vancouver (where homebuilding was flat). Elsewhere, starts dropped in Newfoundland and Labrador (-0.1k to 1.2k units), New Brunswick (-2.9k to 1.7k units), and Manitoba (-0.7k to 5.9k units).
- On the flipside, starts popped higher in Alberta (+12.5k to 39.6k), rising to their highest level since 2015 and driven by a surge in new apartment construction. Starts also gained in PEI (+0.6k to 1.9k units), Nova Scotia (+2.8k to 6.7k units) and Saskatchewan (+0.5k to 2.7k units).
Key Implications
- Starts ended the year on a disappointing note. However, at just below 200k, the level is not unduly concerning. And, with robust population growth, relatively low interest rates, rising home prices and low rental vacancy rates in key markets, a sharp downturn in homebuilding remains an unlikely scenario.
- For 2019 overall, housing starts glided modestly lower compared to the year prior, consistent with our expectations. Declines in Ontario, and to a lesser extent, Saskatchewan, were partially offset by gains in B.C. and Quebec. Looking ahead to 2020, our forecast calls for a further easing in the pace of starts as past declines in pre-construction sales in key markets restrain homebuilding. Today's separately released permits report supports this view, with building intentions remaining elevated, but edging lower.
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