CAD: Residential construction hot in Central Canada - NBF

Canada’s housing starts exceeded expectations in February thanks largely to Ontario and Quebec, explains Kyle Dahms, Research Analyst at NBF.

Key Quotes

“Rising Ontario starts likely reflect builders trying to catch up to demand in Toronto (multis in the city are up 103% to 63.4K, the highest showing on record). Quebec starts were likely driven by rising prices enticing builders in Montreal (multis were up in the later a whopping 153% to 24.3K). Elsewhere, home starts appear to be taking a breather. The sizeable retreat in British Columbia, which follows a previous important decline, could be a sign that the measures implemented in the province – notably a tax on foreign buyers – might be having some success in calming the market.”

“Looking at the quarterly picture, housing starts countrywide are on pace to drop 11.7% in annualized terms in Q1 following two strong quarters of growth. So, after having contributed to GDP growth in the last quarter of 2017, residential investment may subtract from it in Q1. Going forward, residential construction could be restrained by rising interest rates and more rigorous rules for mortgage lending (B-20 regulations). That being said, a strong labour market and favourable immigration flows should continue to provide the necessary support for demand and keep housing starts close to levels consistent with demographic needs (i.e. around 190K).”