Homebuilding remains on firm ground in May
- Canadian housing starts clocked in at a reasonably healthy 193.5k (annualized) units in May. That's up from 166.5k units in April. However, starts in Quebec were not included in April's tally, as the province shut down its construction sector for much of the month. On a 6-month moving average basis, starts clocked in 196.8k units – a bit on the softer side, but nowhere near levels seen during the Global Financial Crisis.
- Homebuilding bounced-back in Quebec, with 60.9k units started during the month. Activity was weaker outside of Quebec, with starts down 20.4% m/m.
- Breaking down the other regions, the picture was somewhat mixed. Starts climbed the Atlantic Region (+2.4k to 9.6k units), with gains in PEI, Nova Scotia and New Brunswick. Starts also increased in B.C., rising 8.5k to 38.0k units. Still, the pace of homebuilding is rapidly easing in the province. On the flipside, Ontario recorded an outsized -37.2k unit decline, although this followed very strong homebuilding in April, and starts remain solid on a trend basis. Starts also pulled back in the Prairies (-7.6k to 27.4k units), on declines in Alberta, Manitoba and Saskatchewan.
Key Implications
- While easing up a touch, homebuilding has generally remained resilient in the face of the pandemic. While this result may surprise some, we note that homebuilding is in part a function of past housing demand, which has been strong. In addition, most provinces didn't shutdown their construction sectors in response to the outbreak.
- It's fair to question how long this resilience will hold up. Permit issuance pulled back sharply in April, which could flag near-term weakness ahead. Looking further out, the prospect of significantly slower population growth in coming quarters dims the medium-term prospects for homebuilding.
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