Canadian housing construction starts slowed in August, coming in at a seasonally adjusted annual rate of 200,986 vs. 205,751 in July - missing expectations of 210,300, according to CBC.
The decrease came as the annual pace of urban starts fell 2.5 per cent to 184,925 units. Starts of urban multiple-unit projects such as condos, apartments and townhouses fell 2.4 per cent to 132,700 units in August while single-detached urban starts fell 2.6 per cent to 52,225 units. -CBC
"The national trend in housing starts continued to decline in August from the historical peak that was recorded in March 2018," said Bob Dugan, CMHC chief economist. "This moderation brings total starts closer to historical averages, largely reflecting recent declines in the trend of multi-unit starts from historically elevated levels earlier in the year."
Of note, housing starts are in Metro Vancouver are slowing to a greater extent, falling 4% from its March 2018 peak, according to Steve Saretsky of the VanCity Condo Guide.
A slowdown in housing starts suggests homebuilders perceive risks ahead or simply can’t make new projects feasible due to elevated land prices and construction costs, which is typical at this stage of the cycle. This does not bode well for future economic growth considering housing and the consumption that goes along with it (renovations, furniture, etc) are a big driver of the economy. In Canada, household consumption and residential investment as a percentage of real GDP is nearly 65%. -VanCity Condo Guide
Saretsky notes that a rebound in housing starts seems unlikely "given how extended this current expansion is," while the labor market is at capacity and rising interest rates should cause investors to reduce exposure considering that Vancouver home sales are at a 17-year low.
Instead, the construction industry is working at a frantic pace to complete existing units. Housing under construction in Metro Vancouver ticked upwards to a new record high in August- hitting a staggering 43,684 units. well above annual population growth of 30,000. -VanCity Condo Guide
Recently completed units, meanwhile, are hovering at all time highs...
And as Saretsky notes, "this will be an important sector to watch moving forward as construction as a share of total employment in the province of BC is nearly 10%."
For more detailed Vancouver housing information, check out Saretsky's August newsletter below: