Housing starts weaker in May, excluding Quebec

The housing agency did not conduct its monthly starts and completion survey in Quebec in April following the introduction of pandemic measures in late March that brought construction in the province to a halt.

It said home construction in Quebec resumed on April 20 and it resumed the survey in the province in May.

Including Quebec, the annual pace of housing starts rose to 193,453 for May.

The six-month moving average of the monthly seasonally adjusted annual rates of housing starts was 196,750 units in May, down from 198,644 in April. Excluding Quebec, the moving average was 151,072 in May, down from 155,600 in April.

TD Bank economist Rishi Sondhi said homebuilding has generally remained resilient in the face of the pandemic.

“While this result may surprise some, we note that homebuilding is in part a function of past housing demand, which has been strong,” Sondhi wrote in a report.

“In addition, most provinces didn’t shutdown their construction sectors in response to the outbreak.”

Sondhi noted that it is fair to question how long this resilience will hold up.

“Permit issuance pulled back sharply in April, which could flag near-term weakness ahead. Looking further out, the prospect of significantly slower population growth in coming quarters dims the medium-term prospects for homebuilding.”

In its outlook last month, CMHC said existing home sales are likely to fall between 19% and 29% from their pre-Covid level before beginning a slow, gradual recovery in 2021.

It said average home prices could fall between 9% and 18% in its forecast, before starting to recover in the first half of 2021.

CMHC said housing starts will likely fall between 51% and 75% in the second half of 2020 from pre-Covid-19 levels, before starting to recover in the first half of 2021 as economic conditions improve.