Homebuilders in Ottawa-Gatineau kicked into high gear last month in an apparent effort to meet pent-up demand, starting work on 814 new properties – a year-over-year increase of nearly 470 per cent, the Canada Mortgage and Housing Corp. reported Friday.
The spike in housing starts was pronounced on both sides of the Ottawa River, with the number of new builds in Ottawa jumping from 117 to 684 – a 485 per cent rise – and the total in Gatineau increasing 400 per cent, from 26 to 130.
While single-detached starts experienced a slight uptick, last month’s construction boom was fuelled by the surging multi-unit sector, which includes condominiums, apartments and townhouses. That category accounted for 727 new builds, or a whopping 89 per cent of all housing starts in February.
In Ottawa, builders began work on 605 new multi-unit dwellings, up from just 58 a year earlier. Developers in Gatineau also significantly stepped up construction of new condos, apartments and townhomes, boosting the number of starts in that category from 10 in February 2018 to 122 last month.
The region’s annual pace of housing starts also shot up dramatically in February, bucking the national trend. CMHC said the seasonally adjusted annual rate of new builds in Ottawa-Gatineau rose from 3,958 in January to 10,784, an increase of 172 per cent.
On the other hand, the annual pace of housing starts in Canada as a whole slowed last month as higher mortgage rates and less stimulative economic conditions helped soften demand, the agency said.
CMHC said the seasonally adjusted annual rate of housing starts fell to 173,153 units in February compared with 206,809 units the month before.
Economists had expected an annual pace of 205,000, according to Thomson Reuters Eikon.
“As a leading indicator of economic activity, February's steep decline in housing starts may raise some eyebrows in Ottawa,” Fotios Raptis, senior economist at TD Bank, wrote in a report.
“Although housing starts seemed to be unscathed by the new B-20 regulations that took effect in January 2018, higher borrowing costs and tougher mortgage qualifying conditions may finally be taking a toll on new residential construction.”
The slowing housing starts come as sales of existing homes has also been slowing. The Canadian Real Estate Association reported home sales posted their weakest January since 2015.
Rising mortgage rates and tighter lending rules have been blamed for the slowdown in sales, prompting some to call on the federal government to make changes in the upcoming federal budget to help first-time homebuyers.
CIBC economist Royce Mendes said 2019 is shaping up to be a tougher year for homebuilding.
“Residential investment was downright ugly in the fourth quarter, and the latest reading on housing starts only added to the bad news on Canadian homebuilding,” Mendes wrote.
“Prior to this reading, starts had seen a bit of a renaissance, rising back above 200,000 for four straight months. But the market has been contending with the effects of higher interest rates and stricter lending standards, and a pace of 200,000 looked unlikely for the year as a whole.”
The overall decline in the pace of housing starts came as the annual rate of urban starts fell 18 per cent in February to 155,663 units.
The pace of urban multiple-unit projects fell 20.2 per cent to 116,284 units, while single-detached urban starts dropped 10.6 per cent to 39,379 units.
Rural starts were estimated at a seasonally adjusted annual rate of 17,490 units.
The six-month moving average of the monthly seasonally adjusted annual rates of housing starts was 203,554 in February, down from 207,742 in January.
– With files from the Canadian Press