Canadian housing starts resume uptrend
Paul Ferley
Assistant Chief Economist
RBC Economics Research
November 9, 2009
Canadian housing starts rose 5.4% in October to an annualized level of 157,300 that more than offset the 3.9% drop recorded in September. Expectations had been for a slightly stronger increase to an annualized 159,300. However, the rise did re-establish the upward trend in this series that had previously been in train through August, with starts steadily rising from a cyclical trough in April of 118,500.
The 8,000 increase in the level of October starts from September’s 149,300 mainly reflected strength in the urban multiples component, which rose 8,800 (13.8%). The more stable urban singles component disappointingly fell by 1,900 (2.7%), although this represented only a partial retracement from the 10,200 (17.3%) surge recorded in September. Rural starts also rose, but by a more modest 1,100 (6.8%).
The strength was relatively broadly based across the country, led by a 15% increase in British Columbia closely followed by a 14.8% rise in Ontario. More modest increases were recorded in the Prairies (6.5%) and in the Atlantic provinces (1.2%). Quebec was the only region to see activity fall, dropping 11.6% in the month.
The increase in starts to 157,300 in October is encouraging as it re-establishes the upward trend from the cyclical trough in April of 118,500. As well, the gain in October was broadly based across most regions of the country. The increase in new construction is consistent with indications of rising housing sales activity. The recovery in residential investment is being fuelled by low interest rates and rising confidence that the worst of the economic downturn is over.
Although the pace of improvement in starts has been halting in recent months, our forecast assumes a more sustained improvement going forward. Housing start activity is expected to average 176,000 in 2010, which will be up from an expected 143,000 this year but down from the 211,000 recorded in 2008.
Paul Ferley
Assistant Chief Economist
RBC Economics Research
November 9, 2009
Canadian housing starts rose 5.4% in October to an annualized level of 157,300 that more than offset the 3.9% drop recorded in September. Expectations had been for a slightly stronger increase to an annualized 159,300. However, the rise did re-establish the upward trend in this series that had previously been in train through August, with starts steadily rising from a cyclical trough in April of 118,500.
The 8,000 increase in the level of October starts from September’s 149,300 mainly reflected strength in the urban multiples component, which rose 8,800 (13.8%). The more stable urban singles component disappointingly fell by 1,900 (2.7%), although this represented only a partial retracement from the 10,200 (17.3%) surge recorded in September. Rural starts also rose, but by a more modest 1,100 (6.8%).
The strength was relatively broadly based across the country, led by a 15% increase in British Columbia closely followed by a 14.8% rise in Ontario. More modest increases were recorded in the Prairies (6.5%) and in the Atlantic provinces (1.2%). Quebec was the only region to see activity fall, dropping 11.6% in the month.
The increase in starts to 157,300 in October is encouraging as it re-establishes the upward trend from the cyclical trough in April of 118,500. As well, the gain in October was broadly based across most regions of the country. The increase in new construction is consistent with indications of rising housing sales activity. The recovery in residential investment is being fuelled by low interest rates and rising confidence that the worst of the economic downturn is over.
Although the pace of improvement in starts has been halting in recent months, our forecast assumes a more sustained improvement going forward. Housing start activity is expected to average 176,000 in 2010, which will be up from an expected 143,000 this year but down from the 211,000 recorded in 2008.
