Canadian housing starts unexpectedly jumped in August from July as condo building surged to meet demand for lower-cost options in the nation’s hottest market, extending a housing boom that is one of the few bright spots in Canada’s otherwise tepid economy.
Wednesday’s report from the Canada Mortgage and Housing Corp. showed the seasonally adjusted annualized rate of housing starts jumped to 216,924 in August from an upwardly revised 193,253 units in July. Forecasters had expected 190,000 starts.
Canada’s housing market continues to defy expectations for a slowdown, despite broader economic weakness and low oil prices, with strong demand in Toronto offsetting a softer market in oil-dependent Calgary. Historically low borrowing costs have helped extend the boom.
“(This is) the strongest level for housing starts since September 2012, and comes entirely on the back of a jump in new condo starts in Toronto,” BMO Capital Markets senior economist Robert Kavcic said in a research note.
Canada’s largest market had seen a cooling in condominium building in 2014 amid fears of a looming correction, but home prices and sales have barely paused since 2009 and analysts are divided over whether the boom will end with a crash or a soft landing.
The Canadian economy saw a mild recession in the first half of the year, but economists and policymakers expect growth will resume in the third quarter.
CMHC Chief Economist Bob Dugan said the strong condo activity in Toronto comes amid a shift in demand from higher-priced single detached homes towards lower-priced alternatives. And while Toronto is hot, other markets are cooling.
“While national starts have increased, housing construction has started to slow in Alberta and Saskatchewan as a result of weakening economic conditions related to the decline of oil prices,” Dugan said in the report.
A separate report from Statistics Canada showed the value of Canadian building permits issued in July fell less than expected as a decline in construction intentions for non-residential buildings was offset by a surge in plans for multifamily homes.
Building permits decreased 0.6 per cent to $7.74-billion, far short of economists’ expectations for a decline of 5.0 per cent. June’s figures were also revised up to an increase of 15.5 per cent.
Intentions for non-residential construction slumped 13.9 per cent. But residential building permits jumped 8.7 per cent as contractors planned to build more multifamily dwellings, which include apartment buildings and condominiums.