* Housing starts rose 5.3% to 193,600 annualized units in September 2013, thereby beating market expectations for a 185,000 reading in the month.
* The bounce in homebuilding in September reflected increased activity among all components. Urban multiple-unit (5.9%) and urban single-unit (1.4%) starts saw solid gains in the month while rural starts surged (17.1%) to reverse an outsized decline in the previous month.
* Increases in starts were recorded in Atlantic Canada (30.0%), the Prairies (24.4%), British Columbia (17.4%), and Quebec (5.9) while a sharp moderation in multiple-unit starts drove a sizable decline in activity in Ontario (-15.6%) to provide some offset.
Canadian housing starts rose 5.3% to 193,600 annualized units in September 2013 largely to reverse the previous month’s 6.4% decline to a four-month low of 184,000 (initially reported as 180,000). The bounce in homebuilding in September, which was stronger than market expectations for a modest increase to 185,000, reflected higher levels of activity in all components. Urban multiple-unit starts rose 5.9% to 113,700 annualized units while urban single-unit starts increased by 1.4% to a four-month high of 63,500 annualized units. Rural starts jumped 17.1% to 16,400, thereby reversing the previous month’s 15.0% plunge.
Gains in activity were reported in Atlantic Canada (29.8% to 9,000 annualized units), the Prairies (24.7% to 49,100), British Columbia (17.4% to 29,600), and Quebec (5.9% to 31,700), with all of these regions reversing declines in the previous month. In contrast, Ontario, which saw a sizable multiple-unit led increase in August, saw a sharp moderation in activity in September with starts down 15.6% to 57,800 as the urban multiples component fell 21.7% in the month.
Monthly housing starts averaged 191,400 annualized units in the third quarter of 2013, which was a modest increase from the 189,600 recorded in the second quarter, which itself represented an increase from the three-year low of 174,500 in the first quarter. This pickup in homebuilding during the summer is largely consistent with the pickup in resale activity seen in the last six months, and with the level of building permits remaining persistently elevated (permits held above 200,000 annualized units for the fifth straight month in August), there is scope for further gains in the near term. As we move into 2014, we anticipate that the demand for housing will moderate as affordability deteriorates against a backdrop of elevated home prices and rising interest rates, and result in a moderation in new home construction. Our forecast calls for housing starts to drift lower during the next year and finish 2014 at 172,000 annualized units, which would be a level that is more consistent with household formation in Canada.
RBC