February 27, 2019

How the Canadian Housing Market Kicked Off the Year

Housing Starts

The annual pace of housing starts – new housing construction projects – slowed, according to Canada Mortgage and Housing Corporation (CMHC), but dropped less than what was expected for the beginning of the year.

It’s too early to say where the Canadian housing market is heading. But we can start tracking its direction by looking at some significant January figures.

Compared with 213,630 units in December, the seasonally adjusted annual rate came in at 207,968 last month. This is slightly higher than the expected annualized pace of 205,000 for January.

The annual pace of urban starts slowed by 2.1% to 190,912 units as single-detached urban starts slumped by 10.4% to 44,559 units. The annual pace of multiple-unit projects such as condos, apartments and townhouses, however, rose by 0.7% to 146,353 units.

In Vancouver, the housing starts were holding steady after trending lower in the second half of last year.

In Toronto, housing starts saw little change, although increasing borrowing costs meant pre-construction sales of new homes remained low. CMHC expects this to result in even fewer units breaking ground this year.

Looking at other regions, CMHC observed housing starts falling in Quebec and rising in Alberta from low levels. Meanwhile, New Brunswick experienced a 33% increase compared to last year. The increase, according to CMHC, largely stemmed from multiple-unit starts.

Home Prices

The Teranet-National Bank National Composite House Price Index slowed by 0.1% last month from December.

Prices declined the most in western Canada’s three biggest housing markets. Slumping oil prices have taken a toll on Alberta home prices, with Edmonton down by 0.8% and Calgary down by 0.5%. Meanwhile, Vancouver home prices dipped by 0.3% – but prices are still not far off from historic highs.

While prices rose in Quebec City (1.3%), Halifax (0.7%), Montreal (0.2%), Toronto (0.1%) and Winnipeg (0.1%), these increases are not enough to swing the national average into positive territory, according to Yahoo Finance.

Home Sales

The number of national home sales rose 3.6% last month from December, but this figure was still below the level seen in January of last year. The Canadian Real Estate Association (CREA) said 23,968 properties were sold through the Multiple Listing Service (MLS) last month, down from 24,977 a year earlier.

CREA also reported that the sales-to-new-listings ratio (SNLR) dropped across most parts of the country last month. SNLR measures the ratio of home sales to the number of new listings on MLS.

Real estate markets in western Canada showed further drops. Fraser Valley experienced the biggest drop with an SNLR of 48.5%, down by 24.2% from last year. Vancouver was second at 43.3%, down by 22.9%. Calgary came in third with an SNLR of 45.9%, down by 8.5%.

Meanwhile, eastern Canadian real estate markets showed annual improvements. Montreal showed the largest gain with an SNLR of 70.1%, up by 6.6% from last year. Ottawa came in second at 70.2%, up by 5.3%. Quebec City rose to 52.6%, up by 0.8%. These three markets outperformed the national average of 54.3%, down by 4.3% from last year.