Canada: Housing starts slowdown in March, still remain strong - NBF

Kyle Dahms, analyst at the National Bank of Canada, point out that despite the decline in March, housing starts remain strong in Canada. 

Key Quotes:

“Housing starts edged down in March to an annualized 225.2K units. Urban starts were down 5.9K (to 208.2K) as groundbreakings in the multiple category dropped (-11.4K to 144.6K) which more than offset an increase for single units (+5.5K to 63.7K). Rural starts, for their part, edged up 0.1K to 17.0K. The modest drop at the national level was a result of a great deal of variation in the country’s provinces.”

“Housing starts declined in March but still managed to exceed expectations. The decline was mostly due to a sizeable variation in Ontario urban starts which fell 30.4% month over month.”

“Looking at the quarterly picture, housing starts countrywide are on pace to drop 8.7% in annualized terms in Q1. So, after having contributed to GDP growth in the last half of 2017, residential investment is set to subtract from it in Q1. Going forward, residential construction could be restrained by rising interest rates and more rigorous rules for mortgage lending (B-20 regulations). 

“A strong labour market and favourable immigration flows should continue to provide the necessary support for demand and keep housing starts slightly above levels consistent with demographic needs (i.e. around 190K).”