Canadian housing starts declined in April after hitting a near decade-high in the previous month, although remaining at elevated levels due to tight conditions in the Toronto-area resale market.
Housing starts fell 15.1% to a seasonally-adjusted rate of 214,098 units in April, Canada Mortgage and Housing Corp. said Monday. Market expectations were for a rise to 220,000, according to economists at Royal Bank of Canada. CMHC said the previous month's figures were revised slightly downward, and now show seasonally-adjusted housing starts of 252,305 for March.
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The housing agency said April marked the fifth straight month housing starts exceeded 200,000 on a seasonally adjusted basis. This suggests new supply "is still coming back as an affordability safety valve on tight conditions in some key resale markets," said Derek Holt, economist at Bank of Nova Scotia.
He added housing starts are presently on track for a 17% annualized decline in the second quarter, "but that's to be expected as the super-acceleration in the first quarter probably wasn't sustainable." Despite the decline, housing starts will likely come in at an elevated pace for the April-to-June period, Mr. Holt said.
This marks the first piece of significant national housing data after the province of Ontario introduced measures aimed at curbing escalating price gains in the Toronto-area market. Late last month, CMHC said evidence continues to point to "problematic conditions" in Canada's real-estate market. The agency said increases in house prices in the Toronto region of 30% and over on a one-year basis couldn't be justified by economic fundamentals.
The warning is similar to messages from the Bank of Canada, in which Gov. Stephen Poloz said as recently as last week that speculative activity appears to be driving house-price inflation.
Regarding Toronto, CMHC said Monday that momentum has been building in new-home construction so far in 2017, reaching levels last witnessed nearly a decade ago. "Tight conditions in the resale market continue to cause demand to spill over into the new home market," the agency said.
Toronto's hot property market is having implications elsewhere, the agency said. In London, Ontario, about 125 miles west of Toronto, single-detached house starts surged 35% in April on a seasonally unadjusted basis from a year ago, reflecting a wide gap between house prices in Toronto and the southwestern Ontario city of 494,000. London, CMHC said, has become "much more appealing to retirees from Toronto who wish to sell their home but not downsize."
CMHC's April report said urban housing starts fell 15.3% to 199,485 units on a seasonally-adjusted basis. Multiunit urban starts, which includes condominiums, declined 16.7% to 134,314 units, while single-detached starts in urban centers decreased 12.1% to 65,171 units.
Rural starts were estimated at a seasonally adjusted annual rate of 14,613 units.
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(END) Dow Jones Newswires
May 08, 2017 09:59 ET (13:59 GMT)