Canada’s housing market, one of the nation’s few drivers of economic growth in 2015, ended the year with a whimper.
The pace of home starts fell 18 percent in December, the biggest one-month drop in three years, as developers put a chill on new Toronto condominium developments during the month, Ottawa-based Canada Mortgage & Housing Corp. said Monday.
The drop in December capped what was largely a strong year for the industry, with housing starts reaching their highest levels since 2012. Those gains were driven by a surge in Toronto condo construction that has even raised concerns developers in Canada’s biggest city may be overbuilding.
“The downside surprise in housing starts to end 2015 is a reprieve after new home construction was on pace for unsustainable levels of activity,” Laura Cooper, an economist at Royal Bank of Canada, said in a note to investors. “The strength in housing market activity occurred despite the protracted downturn in crude oil prices.”
The resilience in housing nationally provided some comfort to an economy whipped by a plunge in oil prices, with output contracting in the first half of last year and the dollar plunging to the lowest in 12 years. Residential construction was the fastest growing component of spending in the economy last year.
For all of 2015, developers began work on 195,536 homes, up
3.3 percent from a year earlier. Starts in Toronto, which were up 46 percent this year, accounted for about 22 percent of all developments in the country and offset falling construction in oil-producing Alberta.
“Because of the general acceleration in the second half of 2015, residential investment is still likely to provide a modest catalyst to growth in the next few quarters as new projects are seen through to completion,” Nick Exarhos, an economist at CIBC World Markets, said in a note.
In December, the annual pace of home starts fell by 18.4 percent to 172,965 at a seasonally adjusted annual pace in December. The figure was lower than all 15 responses to a Bloomberg economist survey, which had a median estimate for a 200,000 rate.
Multiple-unit starts in urban areas dropped 27 percent to 101,264, the largest percentage decrease since April 2009, CMHC figures showed. Single-family starts were little changed at 57,743.
(Updates with analyst comment in fourth paragraph.)