Canada likely keeps construction elevated through 2015 and H1 2016

Consistent with the strength in Canada's existing home market so far in 2015, new homebuilding also heated up in September. Builders broke ground on 230,701 (annualized) new units in September, the highest level of housing starts since August 2012. That brings the 6-month average to 202, 506. 

Note, CMHC started reporting the 6-month moving average because housing starts have become more volatile on a month-to-month basis, along with the growing importance of multi-family construction.

"The strength in new home construction over the last six months is consistent with the acceleration in housing demand and prices. Both existing and new home sales (in some key markets) topped record high levels in first half of 2015. The increased appetite for Canadian housing will likely keep construction elevated through the rest of 2015 and first half of 2016", says Economics TD.  

In addition, CMHC's data release this morning came with a word of warning. The chief economist, Bob Dugan, also noted that " trend activity is now above the projected annual pace of around 190,000 new households. This underscores the continuing need for inventory management to minimize the number of completed but unsold units."  

The increase in housing construction is of particular concern in the Prairie Region where housing market conditions have softened considerably so far over 2015, but the number of new units under construction was already at record levels. 

"However, with interest rates likely as low as they are likely to get, some of the steam in housing demand will likely fade as pent-up demand becomes exhausted. Housing construction will moderate along with overall housing market activity", added Economics TD. 
Ontario has also seen a spike in the number of newly completed but unabsorbed units over the first half of 2015, and new building will only add to the rising inventory of new homes. However, demand in Ontario remains healthy and the market for condos is still fairly balanced, for now.