OTTAWA – Canadian housing starts unexpectedly surged in November to their highest level in almost 10 years, fueled by the construction of multifamily dwellings in the Toronto area.
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The upturn in Toronto reflects greater demand for condominiums and townhouses as the steep cost to buy a single-family detached home in Canada's largest urban center has left prospective buyers -- whether younger people or newly-arrived immigrants -- to turn to cheaper options.
Housing starts climbed 13.2%, to a seasonally adjusted annualized rate of 252,184 units in November, up from a revised 222,695 units in the previous month, Canada Mortgage and Housing Corp. said Friday. This shattered market expectations, which were for starts to come in at 211,000, according to economists at Royal Bank of Canada.
CMHC said the trend measure -- a six-month moving average of the monthly seasonally adjusted annual rate -- reached 226,270, or the highest level since February 2008. The stand-alone seasonally adjusted level for November was the highest since April 2012, the agency added.
November's surprise gain marks six straight months in which Canadian housing starts were above the 200,000 mark, and leaves 2017 on track for the largest number of new units added to Canadian inventory in a decade, according to BMO Capital Markets.
"Canadian home-building activity remains rock solid, backed by underlying demographic support," said BMO economist Robert Kavcic. He cited elevated levels of immigration, and migration within Canada that is leading more residents to move to the provinces of Ontario and British Columbia, where economic growth has been strongest.
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According to Statistics Canada, the country's population expanded 1.2% on a year-over-year basis to 36.7 million as of the third quarter -- or the fastest among the Group of Seven countries. National Bank Financial chief economist Stefane Marion has noted 63% of immigrants granted permanent residence in Canada are deemed ready to join the labor force, versus 13% for the U.S. and 4% for Germany. "Little wonder that Canada continues to outpace the rest of the [developed world] in the growth of its prime-age workforce and in household formation," Mr. Marion said.
Housing in Canada has cooled from earlier this year, in large part because of measures introduced in Ontario to curb speculative real-estate activity in the greater Toronto area and its exurbs. Still, housing starts continue to grow robustly because of affordability issues, said Derek Holt, economist at Bank of Nova Scotia, adding that new home prices have risen at a considerably cooler pace than existing homes.
Statistics Canada's new-house price index rose 3.8% in September from the same year-ago month. In contrast, the Canadian Real Estate Association's benchmark-price index rose 9.7% on a 12-month basis in October. In Toronto, the average price for a single-family detached house was just below 1 million Canadian dollars (about $780,000) in November. In the west-coast city Vancouver, British Columbia -- another Canadian housing hot spot -- the benchmark price for detached properties stood at C$1.61 million in November.
The housing agency said that in November, urban starts increased 14.4%. Multiple urban starts -- incorporating condominiums, townhouses and apartments -- increased 16.9%, to 175,016 units, whereas single-detached urban starts increased 7.5%, to 60,396 units.
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(END) Dow Jones Newswires
December 08, 2017 10:44 ET (15:44 GMT)