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Housing market shows signs of slowing after strong second half of 2013

OTTAWA - Canadian housing construction showed signs of slowing at the end of last year as the pace of residential starts slipped and plans by builders also dipped lower.

Canada Mortgage and Housing Corp. said Thursday the pace of housing starts slowed to the annualized equivalent of 189,672 units on a seasonally adjusted basis, down from 197,797 in November.

The report came as Statistics Canada also reported that contractors took out $6.8 billion worth of building permits in November, down 6.7 per cent from October.

"We saw a pretty solid run up in the early part of the year in home building activity, but we have seen activity level off," BMO Capital Markets senior economist Robert Kavcic said of the housing starts.

"As we look to 2014 we're expecting activity to cool off a little bit further. Basically what we're going to see is homebuilders putting up houses at a rate that is required by the population."

Kavcic noted he gave the housing starts more weight because of the volatility often seen in the permit numbers.

BMO has forecast housing starts for 2014 to come in at 180,000, slightly slower than the pace at which they finished last year.

"We saw a period of underbuilding during the recession, coming out of the recession we saw some overbuilding and now it looks like we're going to gradually get down to fundamental levels," Kavcic said.

CMHC said Thursday that housing starts in urban areas decreased by 5.1 per cent to 168,214 units in December as the Prairie provinces, Atlantic Canada and Ontario reported declines.

Multiple-dwelling projects such as condos, apartments and townhouses accounted for 108,910 of Canadian urban starts in December, a decline of 4.1 per cent. Detached urban starts fell 6.7 per cent to 59,304 units.

"The trend in housing starts has remained essentially stable since October 2013. Housing demand continues to be healthy in Canada," said CMHC's manager of housing analysis, Bruno Duhamel.

"The trend in existing home sales has been increasing since April 2013, while the trend in inventories of newly completed and unabsorbed homes has been declining at a modest pace since September 2013."

Meanwhile, Statistics Canada said the weaker results in the residential sector in Quebec and Ontario were the main drivers of the move lower for the building permits.

However, despite the decrease for the month, Statistics Canada said the total value of permits continued to show a slight upward trend on the strength of eight monthly increases since the beginning of 2013.

The total value of permits in the residential sector fell 7.6 per cent to $4.1 billion in November.

Building permits for multi-family homes fell 8.7 per cent to $1.9 billion for the month, following two consecutive monthly gains. Permits for single-family homes slipped 6.7 per cent to $2.2 billion.

"The decline is in line with our expectation that residential construction will soften in the coming year in the face of affordability challenges to a pace more in line with underlying demographics," CIBC economist Peter Buchanan said.

The non-residential sector fell 5.2 per cent to $2.7 billion. Six provinces saw lower results, with Saskatchewan and Manitoba accounting for most of the decrease. Ontario and Alberta led the four provinces recording gains.

The Canadian Press


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