Canada’s housing starts fall in May, housing starts to continue along current trajectory in 2017

Canada’ housing starts drop more than expected in May, driven by declines seen in Ontario. Housing starts dropped by almost 20,000 to 195k annualized units in May. This is the second straight monthly decline of easing and is the lowest level of starts in six months, noted TD Economics in a research report. It is also quite below the 202k reading anticipated by the street. The continued easing decelerated the six-month moving average to 198k.

The single-family and multifamily segments both saw declines on the month, whereas rural homebuilding was up slightly. Single family segment recorded a drop of 6000, while multifamily segment saw a drop of 14000.

Region wise, the drops were concentrated in Ontario, Quebec and Atlantic Canada – where N.S. saw a slowdown from the rapid rate witnessed in April. Meanwhile, Prairies and British Columbia recorded a higher rate of homebuilding, with the latter lifted by Manitoba but seeing widespread gains throughout all three provinces.

Activity in Toronto, which is the nation’s most closely-watched housing market, almost halved pulled back 18k to just 22k – the slowest rate in almost three years. Meanwhile, starts in other major metros were greatly unchanged, with Vancouver at 29k and Montreal at 21k.

The report marks the second straight month when homebuilders decelerated the rate of new activity after a strong print in March. Although a decline was expected, the slowdown was more pronounced than expected. Furthermore, while the trend rate of homebuilding has slowed this month to above 214k, this trend is expected to wane later this year as the sharp rise in early-2017 is increasingly in the rearview, said TD Economics.

“The likely cooling-off in Ontario is likely to be somewhat offset by a stronger pace of homebuilding in recovering markets across Canada. Taken together, we expect housing starts in Canada to continue along their current trajectory and settle closer to 200k later this year and slightly below that level into 2018”, added TD Economics.