Ottawa-Gatineau homebuilding activity slows in June: CMHC

housing starts

Housing starts in Ottawa-Gatineau fell 20 per cent in June compared with a year earlier, thanks to a decline in new builds of pricier single-detached homes on the Ottawa side of the river and a steep drop in multi-unit projects in Gatineau.

Homebuilders in the National Capital Region launched 945 new units last month, down from 1,179 in June 2018, according to figures released Tuesday by the Canada Mortgage and Housing Corp. 

While both major categories experienced a similar downward trend overall ​– single-detached starts were down 19 per cent across the region and the number of new multi-unit builds such as condos, apartments and townhouses fell 20 per cent ​– the slowdown affected the two cities quite differently.

In Ottawa, developers scaled back construction of single-detached homes by 19 per cent year-over-year, from 367 to 297. In Gatineau, meanwhile, single home builds jumped 36 per cent – albeit in a much smaller overall sample size, with the number of starts rising to 34 from 25.

But Gatineau took a major hit in multi-unit starts, with builders launching just 81 new condo and apartment suites last month – down 60 per cent from 204 such starts a year earlier. By contrast, Ottawa also saw only a slight decline in condo, apartment and townhome starts, with the number of new builds dropping from 608 to 567.

The slowdown in housing starts in Ottawa mirrored the trend across Ontario, with new builds in the province plummeting 34 per cent year-over-year. The steep drop in new housing construction in Ontario offset big gains in most of the rest of the country – including British Columbia, where starts jumped a whopping 72 per cent, and the Prairies, where new builds increased by 26 per cent.  

Ottawa-Gatineau’s seasonally adjusted annual rate of housing starts also dropped in June to 10,453 units, CMHC said, down 23 per cent from May’s total of 13,594.

Nationally, the annual pace of housing starts picked up in June, the latest piece of economic data to paint a picture of a stronger second quarter.

CMHC said the pace of housing starts rose to a seasonally adjusted annual rate of 245,657 units compared with 196,809 units in May.

The result topped the 210,000 units that economists had expected, according to Thomson Reuters Eikon.

Robert Kavcic, senior economist at BMO Capital Markets, said the result was yet another factor helping to drive a strong rebound in second-quarter growth.

“Residential construction activity remains rock solid, as still-strong demographic flows are supporting unit demand,” Kavcic wrote in a note.

The housing report came a day ahead of the Bank of Canada's next interest rate decision. The central bank is widely expected to keep its key interest rate target on hold on Wednesday when it also releases its latest monetary policy report.

The Canadian economy hit a weak spot at the end of 2018 that extended through the start of this year. However, strength has been building in recent months as the Bank of Canada expected.

The increase in the pace of home starts came as the rate of urban starts increased by 26 per cent in June to 234,238 units.

The annualized pace of multiple-unit projects increased by 31 per cent to 185,804 units last month, while the pace of single-detached urban starts rose eight per cent to 48,434 units.

Rural starts were estimated at a seasonally adjusted annual rate of 11,419 units.

TD Bank economist Rishi Sondhi said new home construction in Canada has continued to hold up well, in contrast to the home resale market.

“That said, starts are moving gradually lower on a trend basis, with the six-month average well off its near-term peak observed in late 2017,” Sondhi wrote.

“We anticipate some further moderation, as starts move closer to a more fundamentally supported level of around 200,000.”

The six-month moving average of the monthly seasonally adjusted annual rates was 205,838 units in June compared with 200,530 in May.

In a separate report, Statistics Canada said Tuesday the value of building permits issued in May fell to $8.2 billion compared with a record $9.5 billion in April.

The drop came as the value of permits for multi-family dwellings in British Columbia fell following a significant rise in April in response to impending increases in development costs.

The value of residential permits fell 17.2 per cent to $5.0 billion in May, following a 26.6 per cent increase in April.

The value of non-residential permits dropped 5.7 per cent to $3.3 billion in May.

– With files from the Canadian Press