Building is booming but will it last?

Housing starts rose in July – an unexpected development that isn’t expected to last, according to RBC.

“Our base case outlook continues to assume that that pullback in resale activity alongside gradually rising interest rates and stretched home affordability in some regions will ultimately prompt a further gradual slowdown in resales and, eventually, building activity later this year,” Nathan Janzen, senior economist with RBC, said in a recent report.

Canada Mortgage and Housing Corp. reported the seasonally adjusted annual rate of housing starts increased to 222,324 units in July, up from 212,948 in June.

The annual pace of urban home construction increased by 5.5 per cent to 206,122 units, driven by a rise in multiple urban starts -- generally apartment buildings, townhouses and condominiums -- while single, detached home starts slowed.

Multiple urban starts increased by 10.4 per cent to 141,950 while single-detached urban starts fell by 3.9 per cent to 64,172.

Rural starts were estimated at a seasonally adjusted annual rate of 16,202 units.

The six-month moving average of the monthly seasonally adjusted annual rates increased to 217,550 in July compared with 215,175 in June.

“New Canadian homebuilding remained very strong to kick off the second half of 2017. The 222k (annualized rate) housing starts in July was above the average 215k over the first half of the year which already was well-above most estimates of the underlying rate of household formation,” Janzen said. “Much of the recent strength has been concentrated in B.C. where starts have rebounded back close to record highs after slowing late last year. New building activity has also been trending modestly higher in the prairies, Quebec, and the Atlantic provinces though.”

With files from Canadian Press

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COMMENTS

  • by M 2017-08-16 12:59:13 AM

    Yes, and the banks make it worse by offering such low returns compared with venture capital, for example. One must learn to see through banks making moralizing noises when their competitors in real estate investment give much better rates of return.

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