Can this housing starts data quell market worries?

Housing starts in Canada were trending slightly lower in December as developers work to stabilize the pace of new home construction, and by extension the supposedly overheated housing market.

According to the latest figures from CMHC, the trend measure of Canadian housing starts in December was 192,047, down 1.4 per cent from December a year ago. The trend represents a six-month moving average of seasonally adjusted housing starts.

“The modest decline in the trend in December reflected lower levels of both multiple and single-detached starts,” said Bob Dugan, the chief economist for the CMHC.

“Overall, activity in 2014 continued to be supported by employment growth and migration with [seasonally adjusted annual rates of] starts remaining essentially unchanged at 189,401 compared to 187,923 in 2013. These factors are expected to continue to promote stability in the pace of new home construction during 2015.”

Seasonally adjusted rural starts fell 9.8 per cent from the month before to 17,645 in December, while total urban starts fell 6.2 per cent from November, to 162,915. That included just 59,681 starts of single-detached properties, highlighting the national shift to multi-unit properties.

In Vancouver, however, housing starts trended up 2.7 per cent to 20,030 in December, mainly on actual starts of single-detached homes, which spiked 25 per cent over the year to 372 starts for the month of December. Seasonally adjusted starts in the West Coast city rose slightly to 21,325 in December.

“The trend measure of housing starts moved higher in December due to small increases in construction of all types of homes except town houses,” said Robyn Adamache, CMHC’s senior market analyst.

“The actual number of housing starts in 2014 totalled 19,212 units, a slight increase over the previous year. Single-detached homebuilding accounted for most of this increase and was concentrated in the cities of Burnaby, Coquitlam, Richmond, Surrey and Vancouver.”

Meanwhile, in Toronto, the six-month trend for starts in Toronto was essentially flat at 25,509. Seasonally adjusted starts, however, rose 9.9 per cent to 26,398 in December, compared to the year-ago period. Actual starts of single-detached homes did not fare as well as in Vancouver, falling 14 per cent to just 690 starts in December.

Toronto housing starts stabilized in December after trending lower for most of the second half of the year, said Andrew Scott, CMHC’s Toronto senior market analyst.

Toronto posted 28,929 new housing starts in 2014, a decline of 14 per cent from 2013, which is mainly attributable to a downturn in condominium apartment pre-construction sales between mid-2012 and mid-2013.

"Nonetheless, stronger pre-construction sales in 2014, supportive economic conditions and mortgage rates near historic lows will likely translate into higher starts in 2015 for the GTA”.
 

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