June 18, 2013

September 19, 2012

Toronto is on target to set a new annual home starts record

ALEX CARRICK

Chief Economist, CanaData

August was another outstanding month for housing starts nationally, according to Canada Mortgage and Housing Corporation (CMHC).

The latest seasonally adjusted and annualized figure was 225,000 units, up 8.2% from July and an increase of 17.6% from August of last year.

Year-to-date housing starts in Canada have averaged 218,000 units through the first eight months of this year, which is an increase of 15.2% versus the same period last year.

The consensus expectation has been for a drop-off in home starts beginning this fall. Traffic in showrooms is apparently down. And the measures adopted by the federal government to tighten mortgage approvals are cutting into first-time homebuyer demand.

But for the moment at least, the numbers remain elevated and there is some measure of strength in almost all regions across the land.

Only one province, Nova Scotia (-12%), has recorded a decline in starts so far this year. One other province, Quebec (+1%), has been flat.

That isn’t to say there isn’t some regional disparity in the starts figures. The West is clearly doing better than most of the East.

Four of the top five provincial percentage increases have been in Western Canada, with Alberta in the lead (+36% and 1st place), followed by Saskatchewan (+31% and 2nd place), Manitoba (+26% and 3rd position) and British Columbia (+11% and 5th spot).

Only Ontario (+20% for 4th position) has broken into the elite circle comprised of the western provinces.

Ontario’s substantial increase has come mainly thanks to Toronto’s condominium market.

While Toronto’s single-family starts year-to-date in August were -2%, the multi-unit market was +32%.

Nor did Toronto’s individual-month-of-August multi-unit starts show any let up. Month over month (i.e., versus July 2012), they were +32% and year over year (i.e., versus August 2011), they were more than double at +107.8%.

High-rise residential building cranes will continue to be a part of the city’s distinctive skyline for some time to come.

Through eight months, total Toronto home starts have been 33,300 units. A straight-line projection would see them end the year at 50,000 units. Any figure above 46,500 units would set a new annual record.

The previous benchmark peak for home starts in Toronto was established in 1987. They were nearly as high again in 2003 at 45,500 units.

The 2003 figure came within a cluster of prosperity, with both the two preceding years and the two following years exceeding 40,000 units.

Among Canada’s 33 census metropolitan areas, Toronto home starts (33,270 units year to date) so far this year are accounting for 30% of the total.

Let’s put that in perspective. The population of Canada’s 33 census metropolitan areas is 23.6 million or approximately two-thirds of Canada as a whole.

Toronto’s share of the 33-city population total is 25% or one-quarter.

Toronto new home starts through August were 26% higher than the two cities with the next highest totals combined, Montreal (13,287 units year to date) and Vancouver (13,112 units year to date).

In Montreal, single-family starts were -14% year-to-date in August while multiples were +3%.

In Vancouver, the comparable percentage changes were -3% and +19%. In the individual month of August, Vancouver multi-family starts were +28% month to month and +29% year over year.

Toronto and Vancouver are the two cities specifically cited by analysts and government officials when worries are expressed that too strong condo markets may be setting the stage for an inevitable bust.

In the West, the urban centres with the strongest home starts so far this year have also been among those with the best labour markets. CanaData ranks cities according to two criteria, employment growth (highest to lowest) and unemployment rate (lowest to highest).

The four cities with the best labour markets in the West – Edmonton, Calgary, Regina and Winnipeg – are also among the frontrunners for home starts so far this year, according to percentage increases.

For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog.

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