New condos in the eastern part of the country pulled Canadian housing starts slightly above economists’ expectations for February.
Housing starts for the month came in at 192,094 on a seasonally adjusted annualized basis, above the consensus call for 190,000.
The quantity of new homes on which construction began exceeded forecasts even though starts of detached houses in urban areas actually fell 2.4 per cent, to 59,126 units, and starts declined in the Prairies and British Columbia. The level of overall starts was also surprising to some economists who thought the number might come in shy of expectations because of bad weather.
“After weather-related weakness sent a chill through Canada’s home-building 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,” Laura Cooper, an economist at Royal Bank of Canada, wrote in a research note. “That being said, we anticipate that the recent moderation in resale activity will spillover into the home-building sector as overall housing affordability pressures will increasingly weigh on housing demand.”
Starts of homes with multiple units (largely condos) in urban centres rose by 13.3 per cent in February, to 116,458 units. Urban starts were stable in Ontario, and higher in Quebec and Atlantic Canada.
“There was no obvious weather effect on shovels going into the ground last month as housing starts climbed in line with consensus expectations and our own,” economists at Bank of Nova Scotia wrote in a research note. “This was an urban condo report,” they added, noting that housing starts in rural areas fell 3.6 per cent.
Starts were up by province from Ontario eastward, with the largest gain being in Quebec which saw starts rise from 27,400 in January to 46,300, the Scotiabank economists pointed out.
“Over the past year, single-unit starts are at their weakest level (other than the last recession) since early 1997, while multis are off recent highs but remain historically strong,” Bank of Montreal economist Benjamin Reitzes wrote in a research note.
He added that more homes were started in February than new households. “February’s rebound in housing starts from a weather-depressed start to the year pushed them modestly above household formation. However, we anticipate a gentle easing in starts through the course of 2014, consistent with a cooling housing market.”
RBC’s Ms. Cooper said she is expecting starts to drift lower to an overall pace of 182,000 annualized units this year, and then to 174,000 annualized units by 2015.