Canadian housing starts were down 9% in June. What’s behind the drop

Canada Mortgage and Housing Corp. says the annual pace of housing starts in June fell nine per cent compared with May.

The housing agency said the seasonally adjusted annual rate of housing starts in June amounted to 241,672 units, down from 264,929 in May.

“The higher interest rate environment appears to have caught up with some of Canada’s major centres as lower multi-unit starts, particularly in Vancouver and Toronto, drove both the (seasonally adjusted annual rate) and trend down in June,” said CMHC chief economist Bob Dugan in a press release.

“While strong starts growth in June and the first half 2024 in Calgary, Edmonton, and Montreal mitigated some of these decreases, we expect continued downward starts pressure across Canada throughout 2024.”

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Non-seasonally adjusted housing starts were markedly lower in two of Canada’s three major cities compared with June 2023, with Toronto down 60 per cent and Vancouver down 55 per cent.

However, Montreal housing starts rose 226 per cent in June year-over-year as multi-unit activity picked up significantly.

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The actual number of housing starts in urban centres across Canada was down 13 per cent to 20,509 units in June compared with 23,518 units a year earlier. CMHC attributed the decrease to lower multi-unit starts.

The seasonally adjusted annual rate of rural starts was estimated at 18,438.

The six-month moving average of the monthly seasonally adjusted annual rate was down 0.4 per cent at 247,205 units in June compared with 248,260 units in May.

Despite the pullback, TD economist Marc Ercolao said overall starts “remain well above pre-pandemic levels, as builders have broken ground at elevated rates for purpose-built rental and condo units.”

“However, we believe this tide will turn and starts will trend lower on the back of weak pre-sale activity in key markets and elevated input costs,” he said in a note.

The June data serves as a reminder of “just how little breathing room builders are working with,” said NerdWallet Canada’s Clay Jarvis in a statement.

“Unless starts settle into a groove of significant month-over-month increases that lasts for the next several years, we won’t get anywhere near the housing targets set out by the CMHC,” he said.

“It’s hard to feel confident that builders will generate and sustain that kind of momentum, especially those that rely on pre-sales to get projects off the ground.”