• Canadian housing starts fall by 12% to 213,900 in April
• Decline was broadly based across unit types (multiples & singles) and provinces

CMHC reported this morning that Canadian housing starts dipped by 12% in the month of April, which was weaker than the market consensus of 225,000 units but slightly above our own forecast of 210,000 units. After back-to-back months of over-sized strength in multiple starts in February and March, that segment of the new home market seemed ripe for a correction. April’s level of multiple starts in urban areas dipped by 19.2% but remained at a healthy level above 110,000 units and brought us back close to the level observed in January. Single starts in urban areas were 11% lower than in March. Meanwhile, the only nationwide segment to record a gain (+33.2%) was that of rural starts – defined by CMHC as areas with a population of less than 10,000. Rural starts, estimated quarterly, bounced back up to a reasonable 28,500 units in the second quarter after falling to a 6-year low in the first quarter due to inclement weather – near record snowfalls in many parts of the Canadian countryside.

April’s decline in multiple and single starts was also generalized across most provinces. Only three provinces posted a gain on the month, with British Columbia recording the largest in absolute terms (+5,200 units) and P.E.I. gaining the most in percentage terms (+60%). But even those gains combined together represented only about a third of the massive dip in starts recorded in Alberta (-21,500 units or -39%). Starts in Alberta have been on a downward trend since early 2007 and stood in April at their lowest since January 2005. This province accounted for much of the elevated level of Canadian housing starts in 2004-2006 as it played catch-up with a population inflow, and is now adjusting to a lower, more sustainable level of starts. Every other province also recorded a decline in overall starts, but both Ontario and Québec’s change were relatively small at around -4% each.

April’s housing starts figures bring the year-to-date average to 229,200 units which is closer to what fundamentals suggest is an appropriate level than the frothy levels from February and March (around 243,000 units). Our view going forward is that starts will continue to edge down on a trend basis to average 210,000-220,000 units this year. After providing a solid boost to real GDP growth in the first quarter, residential construction activity will likely take a breather in the second quarter, in line with many other components of the Canadian economy.

Pascal Gauthier, Economist
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