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Economic News

Canada: Housing Starts and Home Sales Shake Off the Summer Doldrums in September

October 16, 2024
Kari Norman
Economist

Highlights

  • The pace of housing starts in Canada rose in September to 224k (saar), on the back of increases in both multi-unit housing projects and single-family housing. Table 1 below summarizes key data points.
  • Home sales in Canada advanced by 1.9% in September. Average prices gained 1.4% in the month, essentially reversing price declines in July and August. Table 2 below summarizes key data points.
  • We're tracking real GDP growth in Q3 at about half the 2.8% annualized pace forecast by the Bank of Canada in July.

Implications

September housing starts of 224k were somewhat stronger than August’s 217k but below the 235k expected by economic forecasters. Most of September’s gain was in the multi-unit sector, while single-unit residential construction also picked up slightly (graph 1). Regionally, there were more shovels breaking ground in Ontario and BC. While starts in Alberta and Quebec pulled back slightly in September, year-to-date they are still up almost 37% and 17% respectively as compared to the same period last year.

Homebuilding continues to face many headwinds to finish 2024. We’re still forecasting soft housing starts through the end of the year and into 2025. The federal government estimates their recently announced homebuilding policies will result in an additional 1 million new homes by 2031, rising to 2 million if you include past measures. But our analysis External link. shows that may be overly optimistic given constraints on financing, labour and materials.

Meanwhile, existing home sales rose by 1.9% in September. Homebuyers have started to dip their toes in the market following three consecutive interest rate cuts. Recent policy changes aimed at making homeownership more affordable for first-time homebuyers may have also helped to spur demand. Listings forged ahead by 4.9% in the month, resulting in the sales-to-new listings ratio dropping to 51.3% from 52.8% in August. As a result, at the national level average prices remained relatively stable, recording a slight increase of 1.4% from the prior month. Benchmark prices were unchanged from August.

Regional differences remain significant. The sales to new listings ratio ranged from a low of 35.5% in Toronto to a high of 95.0% in Quebec City. As a result, Toronto is now solidly in a buyers’ market, while Edmonton, Halifax and the Province of Quebec are bordering on sellers’ market territory (graph 2). Price pressures locally are soft in Toronto and Vancouver. Average sales prices in Quebec City rose by 5.1% on a seasonally adjusted basis in September over the prior month and are up 8.2% year-to-date over the same period a year ago. While the province still has some inventory to absorb (4.8 months), if sales continue to outpace listings, Quebec could see more pressure on prices. (See our recent Spotlight on Housing External link. in Quebec.)

Looking ahead, the ongoing interest rate cuts and government incentives for new homebuyers may bring more buyers back to the market this fall in both new home presales and existing home sales. To date there has been little pressure on prices, but the Bank of Canada will undoubtedly be watching this carefully, since shelter remains the largest component driving inflation External link..

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.