Leah Schnurr – Reuters

Canadian housing starts rose modestly in September as builders broke ground on more multiple-unit dwellings, typically condominiums, data showed on Wednesday.

The report from the Canada Mortgage and Housing Corp (CMHC) showed housing starts climbed to a seasonally adjusted annualized rate of 197,343 units last month from an upwardly revised 196,283 units in August.

That topped an analysts’ forecast for 196,100 starts. August was originally reported as 192,368.

Comment: And who was it that said the Toronto condo boom is over? Uh huh… why do people say such things in the face of completely contradictory data?

The home building sector has shown resilience this year, bouncing back from weakness at the beginning of 2014 that was caused by severe winter weather, and the housing market generally has remained strong, defying expectations for a correction or crash.

Economists, however, expect home building and sales to slow when mortgage rates eventually rise, but that the slowdown may happen gradually.

Comment: IF mortgages rates begin to rise. Remember, my grandmother got a 4% mortgage through CMHC in 1948. Our current rates are NOT an aberration. The 20%+ rates of the 1980s were the aberration.

September’s rise in starts lifted the six-month moving average to 197,747 from 191,095, reflecting stronger activity since April, which has been largely concentrated in multiple unit homes.

The six-month trend is running above the level consistent with demographic fundamentals, which is around 185,000, Mazen Issa, senior Canada macro strategist at TD Securities, wrote in a note.

“Unless the low interest rate backdrop changes, housing starts are unlikely to correct much in the months ahead,” he said.

With the Bank of Canada not appearing to be in a rush to tighten policy, TD sees starts only gradually easing to 192,000 by the end of the year.

Multiple unit starts, most often condominiums, rose 2.4% in September, offsetting a 2.9% decline in single-detached homes. Starts in rural areas rose 1.4%.

The elevated level of condos under construction supports the view that ground-breaking on condos should trend lower over the coming months, CMHC chief economist Bob Dugan said.

Comment: Starts vary widely from month to month. It is the yearly totals that mean something, monthly numbers are too chaotic to use as a trend. And they are all affected by new project launches and sales from 1-3 years ago. Which also range widely. You can have 2 launches in one month, then none in the next month. That doesn’t really mean much in the grand scheme of things, but 100 sales in one month and 0 the next has bad raw numbers. But if there were 20 new projects with 2,000 sales in one year and 18 new projects with 2,100 sales in the next, things are generally the same. Even with variable months.

Activity was concentrated in the provinces of Ontario and Quebec, where starts rose 5.2% and 16.6%, respectively.

Overall, starts appear to be running into resistance at the 200,000 mark, which is good news for those concerned about overbuilding, wrote Robert Kavcic, senior economist at BMO Capital Markets.

“This will let policymakers breathe easier, and suggests that overall building activity in Canada remains within the range required to satisfy demographic demand,” Kavcic said.

Comment: Which is where it has always been. Condos don’t get built unless the majority of them are bought. No sales, no building. Thus checks are built into the system. The banks that are lending $100 million on these projects aren’t stupid! They want to protect their money!

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.
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