Canadian homebuilding bounced back in a big way this spring

The first full month of spring saw homebuilding activity in Canada surprise housing market analysts with a show of strength, suggesting the Canadian market might be on the upswing once more.

In April, Canadian housing starts reached an annualized rate of 235,460, up 22.6 percent compared to March, according to Canada Mortgage and Housing Corporation (CMHC) preliminary data. February homebuilding activity had plunged to a multi-year low.

A housing start occurs when work begins on a residential unit, and the annualized rate estimates how many homes would be built in a year if the current pace of construction persisted.

Some markets were busier than other for contractors last month. Ontario saw annualized starts surge 43.8 percent, thanks to the stabilization of Toronto’s market. Meantime, BC activity jumped 44.4 percent as condo construction ramped up.

“Underlying demand remains healthy amid solid demographic trends and a strong labour market,” writes Priscilla Thiagamoorthy, an economic analyst for BMO, in a response to the CMHC release.

Thiagamoorthy, who notes April was “much stronger than expected,” anticipates homebuilders will break ground for more than 200,000 new homes in 2019. “[B]uilders won’t be packing away the hammers anytime soon,” she says.

Josh Nye, senior economist at RBC, didn’t see the level of homebuilding activity coming either.

“Economists (including ourselves) were perhaps a bit shy to pencil in such a strong increase in housing starts in April, though the rapid pace of permit issuance in recent months and potential for weather delayed starts to show up in the spring means today’s report isn’t a total surprise,” he says, offering up one possible factor behind the leap.

He also suggests the pace of multi-family construction, which includes condos and purpose-built rental buildings, gives the appearance that the country’s housing sector will cease to be a headwind for the economy this year.

Josh Sherman