OTTAWA – The pace of home building slowed in October to a softer reading than economists expected in a report by the federal mortgage insurer, providing yet more evidence of a cooling housing market.
Canada Mortgage and Housing Corp. said Thursday there were 17,507 actual housing starts last month. That translates into a seasonally-adjusted annual rate of 204,107 starts, down almost nine per cent from an annual rate of 223,995 recorded in September.
CMHC said there were drops in both single- and multiple-unit starts in urban areas last month.
Declines were recorded in all regions, with Quebec reporting the biggest drop at 16.9 per cent.
“The monthly decrease in total housing starts posted in October was mostly due to a decrease in both single and multiple starts in urban centres in Quebec and the Prairies,” Mathieu Laberge, deputy chief economist at CMHC, said in a release.
“Multiple starts also declined in many urban centres in Ontario, more than offsetting an increase in such starts in Toronto.”
Seasonally-adjusted urban starts decreased 1.5 per cent in British Columbia, 6.4 per cent in Ontario, 12.3 per cent in the Prairies, and 16.8 per cent in Atlantic Canada.
The agency, which provides mortgage insurance to home buyers and market intelligence to the real-estate industry, estimates rural starts came in at a seasonally-adjusted annual rate of 21,973 units in October.
Earlier this week, the federal Crown corporation predicted 177,300 to 209,900 of housing units will be started next year — substantially less than the forecast of 210,800 to 216,600 for 2012.
Bank of Canada governor Mark Carney said the slowdown is consistent with the bank’s expectations.
“We view household formation around 190,000 annualized and the starts are a little north of 200,000, so they’ve slowed from a very rapid pace to a pace that’s still above household formation,” Carney said in Montreal.
“We’re expecting this decreased contribution from housing relative to GDP… We’re starting to see some things that are consistent with that, so it’s entirely consistent with expectations.”
Emanuella Enenajor of CIBC WM Economics noted that “despite low (interest) rates and surprisingly resilient investor demand, housing construction looks to be struggling to attain new heights in recent months.”
“Although the housing starts data tend to be volatile month-to-month, we expect to see a trend in softening starts through 2013, as a slowdown in secondary market activity weights on homebuilding.”
The CMHC data suggests housing starts — where trends tend to lag those in the home resale market — are falling in line with home sales figures released in the last few months, which points to a broader slowdown in Canada’s housing market.
The latest figures from Canadian Real Estate Association found sales in September fell 15.1 per cent from a year earlier, due in large part to a further tightening of mortgage rules and a slowdown in Vancouver.
A real estate expert at Queen’s University called the drop in housing starts in October “significant” and said it’s “clear evidence” that the housing market is slowing down.
“(The numbers) provide sound evidence reinforcing the idea that housing markets in most regions and cities are cooling off rapidly,” John Andrew, director of the Queen’s real estate roundtable, said in a release.
“Housing starts are clearly responding to the decrease in new and existing home sales that we’ve seen in most markets over the past few months, especially for condos. I expect this trend to deepen over the remainder of 2012 and likely into 2013.”
In a global outlook released last month, the International Monetary Fund singled out housing and household debt, which currently sits at a near-record 163 per cent of income, as the key areas of concerns for Canada.
Those concerns have been voiced before, including by Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty, who has moved four times in as many years to reduce mortgage lending.
Over-saturation, high prices, high debt levels and recent tightening of mortgage rules are impacting the resale market, economists have noted, particularly in the previously torrid markets of Toronto and Vancouver.