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The Real Estate Market Housing starts dip in November, analysts still see soft landing

A home under construction is seen in this file photo.

KEVIN LAMARQUE/REUTERS

There were 192,235 housing starts in Canada on an annualized basis in November, down from the prior month and slightly below economists' expectations.

The number compares to 198,161 annualized starts in October. The consensus forecast among economists was calling for 195,000 starts last month.

"The 6-month moving average of housing starts is now 10-per-cent lower than it was a year ago, which supports our argument of a soft landing for housing in 2014 and 2015," Toronto-Dominion Bank research associate Sonny Scarfone wrote in a note. "Even with the monthly retrenchment, the pace of housing start activity remains greater than…supported by demographic fundamentals (estimated at 175K a year). A softening over the longer term will be necessary as the Canadian new housing market is overbuilt in many large urban centres."

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The rate of starts in major urban centres rose in British Columbia and the Prairies last month, and fell in Ontario and Atlantic Canada.

"Regionally, Ontario was the major weak spot in November, with starts slipping 16 per cent to 59,500 units," Bank of Montreal economist Robert Kavcic wrote in a research note. "Alberta, however, surged to just shy of the best level since early 2008 – starts in that province are up 7.1 per cent year over year through November (best in Canada) as demand and price trends continue to outperform."

For the first ten months of the year starts averaged 187,000 per month on an annualized basis, down from 215,000 in 2012, according to economists from Bank of Nova Scotia.

While starts have softened, economists expect them to decrease further.

"While housing continues to be a pleasant surprise, the pace of building needs to slow or overbuilding will become a more significant issue," Bank of Montreal economist Benjamin Reitzes wrote in a research note Monday prior to the latest data being released. "Look for starts to ease back towards 180,000, near household formation, through 2014."

"As we move into 2013, we continue to expect that activity in the new build sector will ease to a more moderate and sustainable path reflecting the restraining effect of housing affordability pressures," echoed Royal Bank of Canada economist Laura Cooper.

"The trend in housing starts has increased slightly since July, before stabilizing in November," Canada Mortgage and Housing Corp. deputy chief economist Mathieu Laberge stated in a press release. "Overall, housing starts have been following a trend similar to sales on the existing home market. As sales rise relative to listings of existing homes, buyers are increasingly meeting their needs in the new home market."

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There were 192,235 housing starts in Canada on an annualized basis in November, down from the prior month and slightly below economists' expectations.

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Dwelling starts in Canada

Seasonally adjusted at annual rates

SOURCE: Market Analysis Centre, CMHC

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