Housing starts drop by more than 20 percent in May
Canada’s housing market took a beating in May.
The latest report from Canada Mortgage and Housing Corporation (CMHC) reveals a drop in housing starts, excluding Quebec, of more than 20 percent from April’s total.
Because residential construction work was suspended in Quebec for most of April, the national housing agency did not count statistics from that province in its previous month’s Starts and Completions Survey. Comparisons between the two monthly totals show a drop in starts from 166,477 in April to 132,576 in May.
When Quebec is added back into the survey, starts increased by 16 percent to 193,453 units.
The rolling six-month average of the monthly seasonally adjusted annual rates, excluding Quebec, dropped from 155,600 units in April to 151,072 units in May.
“Outside Quebec, the national trend in housing starts decreased in May,” said Bob Dugan, CMHC's chief economist. “Higher multi-family starts in Ontario and the Atlantic provinces were offset by declines in British Columbia and the Prairies. We expect national starts to continue to register declines in the near term, reflecting the impact of COVID-19 measures.”
Starts in Ontario suffered during May. With all construction work allowed to resume on May 19, only the most essential projects saw progress for most of the month. As a result, start volumes dropped by 40 percent—from 93,627 in April to 56,533 in May. Single-family home starts rose by 4 percent to 18,020, but activity in all other housing sectors was cut nearly in half from 76,232 to 38,513.
Activity across the province varied significantly. Starts increased in Hamilton (38 percent), Kingston (375 percent), Kitchener-Waterloo (49 percent), Oshawa (57 percent) and Windsor (8 percent)—in most cases on the backs of strong performances in the multi-unit sectors.
Large drops, however, were recorded in Sudbury (-78 percent), Belleville (-58 percent), London (-54 percent), Toronto (-51 percent), Brantford (-64 percent) and Ottawa (-23 percent). In most of these cases, significant drops were recorded in the multi-unit sector.
The housing sector faces significant challenges going forward, among them a halt to immigration as the country closes its borders due to the COVID-19 pandemic. Significant drops in employment, as well as a softening in rental rates, may also lead to reduced residential construction.
CMHC warned in late May that Canada’s housing market is in for a difficult 2020. It predicted that COVID-19 containment measures and falling oil prices will affect all sectors of the economy. Housing starts, sales and prices are likely to remain below pre-COVID levels through 2022.
“Following large declines in 2020, housing starts, sales and prices are expected to start to recover by mid-2021 as pandemic containment measures are lifted and economic conditions gradually improve,” said Dugan. “Sales and prices are likely to remain below their pre-COVID-19 levels by the end of our forecast horizon in 2022. The precise timing and speed of the recovery is highly uncertain because the virus’s future path is not yet known.”
CMHC’s prediction is for starts to drop by as much as 75 percent from levels reported in the first quarter of 2020 before recovering in the second half of 2021. It projected prices may drop by as much as 18 percent, and sales by 29 percent over the same period.