The pace of Canadian homebuilding eases, but remains firm in September
- Canadian housing starts dropped to 209k (annualized) units in September, still solid, though down from August's extremely robust 261.5k pace.
- September's decline was driven by the multi-starts category, where urban starts dropped 27% m/m to 146k units. In contrast, urban single-detached starts increased 3.4% to 49.9k units.
- The decline in urban starts was broad based, with starts down in 8 of 10 provinces:
- Ontario drove a large share of the national decline, falling by 36.6k to 78.7k units, as starts unwound their massive August gain.
- Homebuilding activity in Quebec dropped by 7.5k to 48k units.
- Starts in B.C. fell by 10.9k to 30.7k units.
- The Prairie region saw starts increase by 3.5k to 29.5k units. The gain was driven entirely by Alberta, where urban starts climbed by 5.7k to 24.8k units. In contrast, starts were lower in Saskatchewan (-0.9k to 1.5k units), and Manitoba (-1.3k to 3.2k units).
- Starts in Atlantic Canada came in at 9k units, down from 9.7k units in August. Declines were recorded in every province but Nova Scotia, where they increased by 3k to 6k units. Elsewhere, starts dropped by a combined 3.7k (to 3k units) in PEI, Newfoundland and Labrador and New Brunswick.
Key Implications
- Despite the decline from August's ultra-strong pace, September marked yet another month of healthy homebuilding activity in Canada. With the solid print, housing starts averaged 237.3k units in the third quarter, up 22.2% from 194.1k units in the second quarter. Not only will this support third quarter residential investment (and overall GDP growth), fourth quarter growth will be given a boost as well, given that starts also impact investment with a lag.
- Moving forward, past pre-construction sales gains and low rates should ensure that starts remain elevated through next year. Afterwards, some slowing may take place as softer population growth brought upon by the pandemic weighs on housing demand, and ultimately, homebuilding.
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