Canadian Housing Starts (September 2018)

Housing starts pullback in September

• Canadian housing starts unexpectedly dropped to 188.7k (annualized) units in September, down 5.1% from August's downwardly revised 198.8k level. The pace disappointed forecasts calling for an increase to 210k. On a longer-term six month moving average basis, starts were 207.8k, marking a 19 month low.     
• Single-detached starts advanced 3% to 63.0k units. Meanwhile, multi-family construction fell 9% to 125.7k.
• Regionally, the drop in homebuilding was narrowly concentrated. Urban starts pulled back sharply in B.C. (-19.6k to 25.6k units) and Alberta (-11.1k to 20.8k units) while dipping slightly in Saskatchewan (-0.2k to 2.8k units). Conversely, urban starts were higher in every other province, with solid gains in the Atlantic Provinces (up a combined +1.8k to 9.3k units), Ontario (+13.2k units to 75.2k) and Quebec (+4.4k units to 33.0k). Starts edged higher in Manitoba (+0.2k to 8.7k units)

Key Implications

• The pace of homebuilding is clearly moderating, with starts lower in six of the past seven months. Rising interest rates, regulatory changes and affordability pressures are weighing on demand and feeding through to homebuilding. Still, healthy permit issuance argues against starts heading much lower, at least in the near-term.
• September's drop leaves third quarter starts about 10% lower than their second quarter pace. This places some modest downside risk to our third quarter residential investment forecast. 

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