Canadian housing starts rise in February

(March 22, 2014 )

·         Housing starts rose by 6.4% to an annualized 192,100 in February 2014, compared to market expectations for a 190,000 reading in the month. The rebound in overall housing starts reflected an increase in urban multiple-unit starts (13.3%). Urban single-unit starts (-2.4%) and rural starts (-3.6%) declined to provide some offset. ·          Unwinding of earlier weather-related weakness likely drove robust gains in Quebec (69.0%) and in Atlantic Canada (68.4%) while activity in Ontario edged marginally higher (0.5). In contrast, weakness in the multiples component drove overall declines in British Columbia (-11.8%) and the Prairies (-15.1%). ·          After weather-related weakness sent a chill through Canada’s homebuilding sector in recent months, activity began to heat up in February with the six-month trend rate of starts increasing for the first time since October 2013. As the spring housing market emerges and with building permits outpacing the level of housing starts for the eleventh consecutive month in February, there remains some upside risk for housing activity to strengthen further in the near term. That being said, we anticipate that recent moderation in resale activity will spillover into the homebuilding sector as overall housing affordability pressures will increasingly weigh on housing demand. We expect that housing starts will drift lower to an overall pace of 182,000 annualized units in 2014 and moderate further to 174,000 annualized units by 2015.