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Canadian housing starts surge in April, but long-term outlook remains cautious

In a positive sign for the Canadian real estate market, housing starts experienced a significant increase in April. According to the Canada Mortgage and Housing Corporation (CMHC), the standalone monthly seasonally adjusted annual rate (SAAR) of total housing starts rising by 22 per cent month-over-month in April, reaching 261,559 units.

This surge in housing starts was primarily driven by the multi-family sector, which saw a remarkable 33 per cent month-on-month increase to reach 201,621 units. However, single-detached urban starts decreased by 2.0 per cent to about 40,000 units.

Vancouver, Toronto, and Montreal stood out with notable gains in total SAAR housing starts. Vancouver experienced a substantial increase of 36 per cent, while Toronto and Montreal saw even more impressive jumps of 54 per cent and 43 per cent, respectively.

Toronto and Montreal recorded declines in single-detached starts, but these were compensated by substantial increases in multi-unit starts; Vancouver posted increases in both segments.

The Atlantic Region witnessed the largest monthly percentage gain, with housing starts increasing by 4,000 to reach a healthy 10,200 units.

In terms of rural starts, the monthly SAAR estimate was 19,974 units, contributing to the overall growth in housing starts across Canada.

However, despite the short-term positive momentum, the trend in housing starts remained relatively stable, with a modest 0.2 per cent decrease from March. The trend measure, which represents a six-month moving average of the monthly SAAR of total housing starts, stood at 240,403 units in April.

According to TD Economics, single-detached units are responsible for this decline, as sales of these homes unwound their significant pandemic-era gains last year, which is now flowing into slower construction activity.

TD economists expect starts will continue to trend lower, thanks to past declines in home sales passing through to weaker homebuilding.

Aled ab Iorwerth, CMHC’s Deputy Chief Economist, explains that while the recent surge in housing starts reflects a return to pre-pandemic levels “housing starts are expected to drop significantly in 2023, before seeing some recovery in 2024 and 2025, according to our latest forecast. The expected decline is due to constraints in new construction, including labour shortages, as well as higher construction and borrowing costs for housing developers.”