Business

CMHC says new home construction jumped 14% in February from previous month

The pace of new home construction climbed 14 per cent in February compared to the previous month, Canada Mortgage and Housing Corp. said on Friday, but the industry continues to struggle under cost pressures.

The national housing agency says the seasonally adjusted annual rate of new home construction — also known as housing starts — amounted to 253,468 units in February, compared with 223,176 in January.

That was higher than the 230,000 units economists were expecting.

When looking at year-over-year figures, February’s housing starts were up 11 per cent, with the increase driven entirely by higher multi-unit starts (e.g. apartments and condos) that increased 16 per cent, while single-detached starts were down 14 per cent.

“As the national housing shortage continues, the focus for developers continues to shift towards multi-unit construction in Canada’s major centres,” said CMHC chief economist Bob Dugan in a news release.

Month-to-month starts can fluctuate significantly as the launch of larger multi-unit developments can skew numbers. Adjusted starts in February were up 79 per cent in Vancouver and down 31 per cent in Montreal.

To smooth out those swings and give a clearer picture of the upcoming housing supply trend, CMHC also reports a six-month moving average of the adjusted rate. In February, the indicator showed starts at 245,665, up by 0.4 per cent from January.

A construction worker is shown at a building site in Ajax, Ont., on Nov., 30, 2023. The increased rate of housing starts in February is likely due to the unusually mild winter weather, according to economist Katherine Judge of CIBC Economics. (Christopher Katsarov/The Canadian Press)

Bounce-back expected, weather could be partly behind increase

“A bounce-back in starts was anticipated in February after January’s decline. However, they continue to trend at a solid level, supported by rising construction of purpose-built rental units and elevated home prices,” wrote TD economist Rishi Sondhi in a note.

Housing starts in the first two months of the first quarter are below their fourth-quarter level and expected to go lower, Sondhi added, “suggesting some potential downward pressure on residential investment growth in the first quarter.”

TD Bank thinks that housing start figures will continue to decline as past weakness in home sales translates to fewer homes built, Sondhi said.

Some of the increase is likely due to the unusually mild winter weather that we’ve seen this year, according to economist Katherine Judge of CIBC Economics.

The weather might also be driving activity in the resale market, she wrote, “along with optimism for [Bank of Canada] rate cuts later this year.”

Economists are expecting the Bank of Canada will move on an interest rate cut in June, which could mean that sidelined homebuyers rush back into the market.

Leave a Reply

Your email address will not be published. Required fields are marked *