Canada’s housing starts rise slightly in August, expected to remain healthy in months ahead

Canada’s housing starts rose slightly in August. Home starts surprised to the upside by rising 1000 to 223k in the month, coming in above expectations for decline to 216k. This is the third straight month of rises and the second highest level since March’s print of quarter million.

The single-family segment dropped slightly in the month by 2000, whereas multifamily homebuilding in large CMAs saw a rise on the month, rising by 4k. Meanwhile, rural homebuilding was greatly unchanged.

Province wise, the gains were concentrated in Ontario, which recorded a rise of 16,000. This was the second-best month since January. Meanwhile, home starts in Quebec was largely flat. On the other hand, housing starts in British Columbia, Prairies and Atlantic Canada saw slower rate. In the Prairies, the losses in Alberta were almost countered by gains in the other two provinces, while in Atlantic Canada the declines were across the board.

In Toronto, housing starts rose almost 10k to 54k, the most rapid pace in a year and a half. Meanwhile, starts in the other major metros were mostly lower, with Vancouver and Montreal both down to 7k to 21k and 14k, respectively.

Activity in Toronto, the country's most closely-watched housing market, rose by nearly 10k to 54k – the fastest pace in a year and a half. On the other hand, starts in other major metros were mostly lower, with Vancouver and Montreal both down 7k to 21k and 14k, respectively.

The housing starts was a good report that implies that the Canadian housing market continues to be quite solid after the wobble it suffered in the second quarter and the uncertainty of regulatory changes in Ontario and rising interest rates. The print in August marks the second-best month in 2017 while the six-month moving average is closing the 220k mark – the most rapid rate since the end of 2012.

Most of the softness seen in the second quarter was due to Ontario after the provincial Fair Housing Plan, which implemented a wide set of policies designed to remove some froth from the market, injected considerable uncertainty, and motivated homebuilders to sit back as the market digested the newly implemented policies. At this point, it would seem as if they are done sitting back, with solid demand due to a strong economy motivating builders to increase production to compensate for the second quarter deceleration, and making Ontario the source of strength in the third quarter, noted TD Economics in a research report.

Overall, Canada’s housing starts are expected to stay relatively healthy in the months ahead; however, the trend is likely to lower as the impacts of rising interest rates and possible new regulation gradually take a bite out of demand. According to TD Economics, starts should hold close to the current levels in the next month or two, but trend towards the 200k level into early 2018 and drop below that threshold the year after.

At 15:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bullish at 136.987, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -10.5387. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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