New home construction up 14% in September from previous month, says CMHC

Canada's housing starts, also known as new home starts, rose 14 per cent in September from the previous month – a sharper rise than expected, data from the national housing agency showed on Thursday.

The seasonally adjusted annual housing start rate was 279,234 units, down from a revised 244,543 units in August, the Canada Mortgage and Housing Corporation (CMHC) said.

Economists expected the number of new starts to rise to 255,000 units.

“The six-month housing starts trend accelerated in September, driven by significantly higher monthly housing starts in Ontario, Quebec and the Prairies,” said Tania Bourassa-Ochoa, CMHC deputy chief economist, in a press release.

She noted that Montreal and Toronto account for more than 25 per cent of the country's monthly housing starts, largely due to an increase in the construction of new rental apartments.

“While these results indicate some resilience, it is worth noting that current homebuilding levels tend to reflect decisions made months or even years ago, when investor confidence was higher than it is today,” Bourassa-Ochoa said.

The increase came as the annual pace of housing starts in Canadian cities with populations of 10,000 or more rose to 254,345 in September, up 16 percent from 219,408 in August.

The annual rate of launches in rural areas is estimated at 24,889.

The start of new construction in September showed “continued resilience despite tough resale conditions,” Robert Kavcic, senior economist at BMO, wrote in a note to clients.

Home starts are now averaging 256,000 over the past 12 months, which is a jump from the lows seen earlier in the year, Kavcic said. However, over the past 12 months, Ontario has averaged 63,000 starts, the lowest in a decade, he added.

“Rents continue to drive housing construction, and activity in this segment now exceeds homeownership and apartment activity combined.”