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Canadian housing starts plunge in October: CMHC

H.S. Borji
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Canadian housing starts plunge in October: CMHC

Canadian housing starts declined unexpectedly in October, as multi-family dwelling projects cooled, a sign the housing market was beginning to moderate after a prolonged boom period.

Groundbreaking last month declined to a seasonally adjusted annual rate of 183,604, down from 197,355 in September, the Canadian Mortgage and Housing Corporation reported today. The figure was well below the median estimate of economists, which called for a reading of 200,000.

October starts pushed the six-month moving average to 197,763.

Urban starts decreased to a seasonally adjusted annual rate of 164,683 from 177,053 the month before. The decline was mainly attributed to a slowdown in multiple housing starts, which decreased to 98,673. Single-detached urban starts increased to 66,010, the national housing agency said.

Groundbreaking declined in five regions, led by British Columbia and followed by Quebec, Atlantic Canada, the Prairies and Ontario.

“The decrease in the trend reflects a decline, in October, of starts of multi-unit dwellings, including condominiums,” said CMHC chief economist Bob Dugan in a statement. “Given the elevated level of condominium units under construction, our expectation is that condominium starts will continue to trend lower over the coming months.”

The decline in multi-family dwelling projects was consistent with the CMHC’s latest forecast, which was released October 30.

“CMHC’s latest forecast calls for a slight moderation in multi-unit starts during 2015, which will be offset by an increase in single-detached starts,” the national housing agency said last month. “Looking ahead to 2016, expectations are for total starts to moderate as builders focus on reducing their inventories.”

Last week Statistics Canada said building permits rebounded sharply in September after plunging the month before. The value of building permits increased 12.7 percent in September, more than double the rate economists had anticipated. The gains were mostly attributed to higher construction intentions in Ontario. Compared to September 2013, permits were up 10.8 percent.

The value of residential building permits increased 6.1 percent, led by gains in seven of the ten Canadian provinces. Year-on-year, the value of residential permits increased 5.4 percent, official data showed.

Authorizations for single family homes increased 2.5 percent. Multi-family dwelling projects increased 10.8 percent.

In total, Canadian municipalities issued 18,199 residential building permits in September, up 9.4 percent from the previous month.

Canada’s housing market continues to defy expectations, as rock-bottom mortgage rates continue to attract buyers to the market. The CMHC has maintained that housing starts will begin to decline next year, although sales are expected to rise as builders shift their focus to clearing inventories.

The Bank of Canada forecasts a “soft landing” for the housing market in the next two years as rising consumer debt levels and higher mortgage rates squeeze the market. Nevertheless, the BOC has acknowledged that housing activity has been “stronger than anticipated,” raising concerns Canada’s residential real estate market was over-heated and headed toward a bubble.

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