July 24, 2019

Supply of Newly Built Homes Soars in June

While new housing supply hit a double-digit increase, prices and demand saw little change.

Housing Starts

The annual pace of new home builds soared by 24.8% in June, offsetting the decline in May. The seasonally adjusted annual rate (SAAR) rose to 245,657 units last month from 196,809 units in May, the Canada Mortgage and Housing Corporation (CMHC) said.

The increase in the pace of housing starts came as the rate of urban starts rose by 26% to 234,238 units last month. The annualized pace of multi-unit projects rose by 31% to 185,804 units, while the pace of single-detached urban starts climbed by 8% to 48,434 units.

Rural starts were estimated at SAAR of 11,419 units.

Meanwhile, the six-month moving average of the monthly SAAR was 205,838 units, up from 200,530 in May.

Home Prices

National home prices made a small increase in June due to a seasonal boost, but the increase was lower than the long-term average for the month. The Teranet-National Bank Composite House Price Index showed that prices edged up by 0.8% last month from May. However, that gain was weaker than its 21-year average of 1.2%.

If seasonal pressures were removed, the composite index would have declined by 0.5% last month. Meanwhile, the year-over-year gain, which was 0.5%, was the smallest seen since November 2009.

Price drops were seen in several western Canadian markets. Vancouver recorded its 11th consecutive month without any gains. In Alberta, Calgary also marked its 11th month without an increase, while Edmonton saw a flat month.

“These readings are consistent with signals from other indicators of soft resale markets in those metropolitan areas,” said Marc Pinsonneault, National Bank of Canada senior economist.

In the eastern part of the country, Toronto, Hamilton and Ottawa recorded gains for three straight months, while Montreal recorded an increase of 0.8%, the 13th index rise in 15 months, according to Reuters.

Home Sales

National home sales saw little change in June, suggesting a pause in the recent rebound. Transactions fell by 0.2% from May, the first decline in four months, the Canadian Real Estate Association (CREA) said.

On a quarterly basis, sales climbed by 5.3%, evidence of stabilization after two quarters of declines.

The data varies geographically, with the westernmost provinces still struggling. Home sales in the City of Vancouver declined by 5.5%, while Calgary sales dropped by 3.9%. Meanwhile, Toronto was flat at 0.2%, and Montreal was up by 2.7%.

“While sales activity in Canada’s three westernmost provinces appears to have stopped deteriorating, it will be some time before supply and demand there becomes better balanced,” said Gregory Klump, CREA’s chief economist.

The quarterly figures for Vancouver, however, looked somewhat better. Sales rose by 12% in the second quarter of the year, the most since the second quarter of 2017, and snapping a string of five consecutive quarters of drops that brought activity in the city to the lowest level since the 2009 recession, according to Bloomberg.