As the COVID-19 pandemic began disrupting all aspects of life in Canada through the second half of March, home building was far from immune to its effects.
At the national level, housing starts fell to 195,200 annualized units, down 7.3 percent from 210,574 in February, according to data released today by the Canada Mortgage and Housing Corporation (CMHC). Housing starts measure how many homes began construction during a given period and are generally viewed as a key factor in determining market health.
“The national trend in housing starts declined in March, likely indicating that the COVID-19 pandemic has begun to impact residential construction activity,” said Bob Dugan, CMHC’s chief economist, in a media release.
“Activity in Toronto and Montreal trended lower, reflecting broader declines in their respective provinces. While Vancouver registered an up-tick, it was not sufficient to offset an overall decline in British Columbia.”
While TD Economist Rishi Sondhi viewed March’s housing starts activity as “reasonably healthy,” he described the data as indicative of a “calm before the storm” ahead of a more dramatic decline in April.
It’s not hard to imagine a sharp downturn when you consider the current state of home construction across the country. Quebec has ceased home construction while BC and Alberta have introduced rigorous on-site practices to minimize the spread of COVID-19. Even in Ontario, where residential construction was deemed an “essential service” by the Ford government, work on all new residential projects has been halted as of April 4th. Only projects that are well on their way to being completed are permitted to continue on-site work.
In a brief published earlier today, BMO Senior Economist Robert Kavcic presented two additional takeaways from the CMHC’s March data.
“First, the [home building] sector was priming itself for an extremely strong run through 2020 given the fundamental backdrop before the COVID-19 outbreak,” wrote Kavcic.
“Second, activity fell sharply in the late stages of March (which monthly sales and starts numbers only capture a slice of), and will likely remain extremely depressed through April and May,” he continued.
Amidst the bleak commentary on the immediate future of Canadian home construction, TD’s Sondhi offered some uplifting guidance on his expectations for activity later in the year.
“Homebuilding is poised to suffer a notable setback in the near-term as the pandemic weighs on construction. However, consistent with the broader economy, we anticipate stronger homebuilding activity in the second half of the year,” he wrote.
