Canadian housing starts slip in hot markets of Toronto, Vancouver

BNN.ca
June 8, 2017
David Ljunggren

Canadian housing starts dipped in May as construction intentions fell in Toronto, another sign that one of the country's hottest real estate markets might be cooling down.

The seasonally adjusted annual rate of starts declined to 194,663 in May from April's upwardly revised 213,498, the second consecutive monthly fall since a record high set in March, the Canada Mortgage and Housing Corporation (CMHC) said on Thursday.

May's figure was a bigger decline than economists' expectations for a decrease to 205,000.

Authorities are trying to clamp down on the Toronto and Vancouver markets amid fears of a possible bubble.

Single detached starts in Toronto dropped by 43 per cent, the first decline since September 2016.

"This coincides with a noticeable increase in new home listings in the resale market, providing added choice to home buyers, causing less demand to spill over into the new home market," the CMHC said in a statement.

Single detached starts in Vancouver slipped by 13 per cent.

Toronto is the engine of the economy in Ontario, where the provincial government imposed a 15 per cent foreign buyers tax in April. British Columbia made the same move last August in an effort to cool Vancouver's housing market.

Data released this week showed Toronto's market cooled in May as sellers cashed in on high prices and buyers moved to the sidelines in the wake of the tax and other new rules aimed at dampening demand in Canada's largest city.

BMO Capital Markets strategist Benjamin Reitzes said activity in Toronto could well remain subdued for the next few months as the market digested the effects of the foreign buyers' tax.

"The surge in existing home supply we've seen over the past two months could also help restrain home building activity as buyers have more choices," he said in a note to clients.

“While softer homebuilding activity is a negative for GDP growth, the return to more sustainable levels should be welcomed, as continued building at a 200k+ pace would mean oversupply was just a matter of time,” Reitzes also wrote.

Across Canada in May, single starts dropped by 7.0 per cent while multiples - typically condominiums and apartments - dropped 10 per cent.

The provinces' efforts are on top of moves from the federal government last year to tighten mortgage lending regulations to try to prevent Canadians from taking on too much debt.

Separately, Statistics Canada said new housing prices jumped by 0.8 per cent in April from March, the biggest gain in almost a year, amid keen buyer interest in Toronto and Vancouver.

The price index excludes apartments and condominiums, which the government says are a particular cause for concern and which account for one-third of new housing.