Canadian Housing Starts (May 2019)

Homebuilding eases in May

• Canadian housing starts declined 13% (m/m) to 202.3k (annualized) units in May. This follows a slightly downwardly revised 233.4k print in April (prior: 235.5k). On a six month moving average basis, starts came in at 202.0k units, slightly lower than in April, though still marking a healthy pace. 
• The drop was due entirely to the multi-family segment. After the prior month's strong gain, multi-family starts fell 18% to 146.0k units in May. Meanwhile, single-detached starts advanced 1.4% m/m to 56.4k units. 
• Provincially, May's drop was narrowly concentrated, with starts lower in four of ten provinces. The largest decline occurred in Ontario, where urban starts plunged by 34.2k units to 49.7k. Urban starts were also slightly lower in Quebec (-2.0k to a still-strong 46.6k) and Nova Scotia (-0.3k to 3.1k) while also dropping in Alberta (-3.3k to 20.9k units). In contrast, urban starts were higher in Manitoba (+2.3k to 8.0k units) and Saskatchewan (+1.1k to 2.3k units). Urban starts also increased in B.C. (+4.1k to 53.4k units) and were 0.9k units higher in the Atlantic Provinces outside of Nova Scotia. 

Key Implications

• After April's spry gain, some slippage in homebuilding was to be anticipated in May. However, housing construction has been firm so far in the second quarter, averaging 217.9k units. Alongside indications of a healthy rise in home sales, this strength sets us up for positive growth in second quarter residential investment - its first in over a year. 
• Moving forward, we anticipate some slowing in the pace of homebuilding, as past declines in housing demand feed into construction. There is some downside risk in B.C's market, which has been supporting the national numbers so far in 2019. 
• All told, homebuilding should remain relatively healthy at around 200k units going forward, lifted by robust population growth, solid labour markets, and the recent slide in borrowing costs.

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