Housing starts surge in February as Ontario, B.C. outpace energy-producing provinces

Theglobeandmail.com
March 8, 2016
By David Ljunggren

Canadian housing starts jumped in February from January as hot Ontario and British Columbia markets outpaced the energy-producing West, where a crude slump has hit confidence, the national housing agency said on Tuesday.

A report from the Canadian Mortgage and Housing Corporation (CMHC) showed the seasonally adjusted annualized rate of housing starts rose to 212,594 units in February from a downwardly revised 165,071 units in January. Forecasters had expected 180,000 starts.

Demand for condominiums is soaring in big cities like Toronto and Vancouver, prompting some analysts to worry about a potential bubble. At the same time, crude-producing provinces like Alberta are in a slump.

“Housing starts are trending at a four-year low in the Prairies, where low oil prices have weakened consumer confidence,” CMHC Chief Economist Bob Dugan said in a statement.

“At the same time, starts are trending at an eight-year high in British Columbia, as new and resale home inventories remain low,” he added.

The Liberal government last December tried to cool the hotter parts of the market, saying it would force people who want to buy more expensive homes to provide a bigger down payment.

BMO Capital Markets economist Robert Kavcic said the national results masked the two-speed nature of the Canadian housing market.

“On one end of the spectrum, residential construction activity is in outright recession, while on the other, new construction has flared well above past highs,” he said in a note to clients.

Mr. Kavcic noted that housing starts in British Columbia hit their highest level since 1990 while Vancouver recorded the most condominium starts on record.

“We’ve long been defenders of the Canadian housing market against the rabid bears, but activity in Vancouver at least is making that case a lot tougher to make,” he said.

Separately, Canada’s national statistics agency Statscan said on Tuesday that the value of Canadian building permits issued in January dropped by 9.8 per cent from December, the second sharp retreat in three months.

The fall exceeded the 2.5-per-cent decline forecast by analysts in a Reuters poll.

A 21-per-cent decrease in construction intentions for multi-family dwellings, concentrated in Ontario and British Columbia, was the main reason for the weaker performance in January. The overall value of permits issued in Alberta fell by 5.3 per cent.