December housing starts top expectations
Housing starts across the country finished the year strongly with December's figure beating the consensus expectations of economists.
Canada Mortgage and Housing Corp. said Tuesday that the annualized rate for housing starts for the last month of 2017 came in at 216,980 units, down from 251,675 units in November. However, the December figure still topped observers' expectation of an annualized rate of 211,000 units.
The annual pace of urban starts dropped 15.1 per cent last month to 198,132 units. Starts of urban multiple units decreased by 22 per cent to 135,176 units in December, while single-detached urban starts increased by 4.7 per cent to 62,956 units.
In a commentary, Scotiabank said Canadian new home construction last year hit the second highest pace of the post-recession period behind only 2012.
"Starts were elevated due to supply shortages and solid demand particularly given less affordable resale housing on average, higher immigration and strong fundamentals including job markets," said Derek Holt, head of capital markets economics at Scotiabank.
"Tighter rent controls in Ontario will cool the multiples construction cycle as last year's starts reflected decisions made before the introduction of rules that diminished the attractiveness of investing in condo projects," Holt said.
Scotia expects housing investment to be a mild drag on the growth of Canadian gross domestic product in 2018.
RBC assistant chief economist Paul Ferley said recent tightening of mortgage lending, further official interest rate increases in both Canada and the U.S. and current poor affordability in a number of key markets will contribute to housing starts continuing to trend lower.
Ferley said RBC's forecast assumes that housing starts will drop to 195,000 this year and 185,000 in 2019.