Housing starts fall sharply to lowest level since 2009 Add to ...
Housing starts plummeted in February to the lowest level since 2009, driven by fewer new condo and multi-residential projects as builders grappled with rising levels of unsold inventory.
Construction of new housing units fell 16 per cent in February to an annualized 156,276, down from 187,025 in January, Canada Mortgage and Housing Corporation said Monday.
It was the lowest level of building activity since July, 2009, said Royal Bank of Canada economist Laura Cooper. Starts fell in eight of 10 provinces, driven by a 25-per-cent drop in construction of new urban multi-residential units, which fell to 86,2014 from 115,123 in January.
Slower construction activity was needed to help developers deal with rising levels of unsold condo units in cities across the country, the housing agency said.
“The declining trend in multiple starts is helping to gradually erode the inventory of completed and unsold units, which is high compared to historical levels," CMHC chief economist Bob Dugan said in a statement.
While record cold temperatures and snowfall last month likely played a role in slowing new construction, many of the warning sights were already there at the start of the year. Developers reported receiving 7.5 per cent fewer building permits in January compared to December, a precursor to housing starts. Home sales also slid in the first months of the year in many markets amid economic uncertainty of lower oil prices.
"We are not entirely surprised to see such a weak number in February given the extremely cold weather, drop in permits and what appeared to us as a questionable boost to starts in the previous month," wrote Toronto-Dominion Bank senior strategist Mazen Issa.
But February's plunge was much deeper than many analysts had expected given that surging housing markets in Toronto and Vancouver were thought to be helping to offset weaknesses elsewhere.
Instead, housing starts fell just 1 per cent February in Alberta and rose slightly in Saskatchewan compared a month earlier, while falling in all markets east of the Prairies.
New home construction fell 53 per cent in Quebec and 35 per cent in Ontario compared to a year earlier, defying expectations that lower interest rates and cheaper gas prices would boost markets outside of oil-dependent Western provinces. Condo construction fell by more than 50 per cent in Toronto, after a near-record wave of completions in February.
Analysts said it was only a matter of time, however, before weaker oil prices put a dent in new home construction in Alberta.
"The oil price shock has yet to fully show up in these data," Bank of Montreal senior economist Robert Kavcic said in a note. "But if recent trends in the resale market are any guide, starts in the oil-producing provinces will be heading lower through 2015."
CMHC said its six-month moving average of housing starts fell for its fifth straight month in February, though it mirrored a similar sharp decline in average starts in February of last year.
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