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  • KPB & Co Research

Data released by the Canada Mortgage and Housing Corporation (CMHC) show that the annual rate at which new dwellings are being built has declined by 13.3% in May-2019 (202,337), relative to April-2019 (233,410). When compared to May-2018 (194,829), dwelling starts was higher by 3.9%. Sequentially, dwelling starts have been volatile since 2019, but when compared to similar periods in 2018, dwelling starts have showed a marked slowdown in the first quarter of the year, with the last 2-months (April and May) showing signs of an acceleration.

With tighter restrictions on mortgages, and higher interest rates across Canada, economists on average had expected dwelling starts to decline to an annualized pace of 205,000. Despite the overall softness in dwelling starts in recent times, the annualized run rate is still high relative to historical norms. At a run-rate of 203,337, dwelling starts is on track to end the year close to levels seen in 2002. Dwelling starts peak in 2004 at a rate of 233,431, before deflating to 149,081 in 2009 in the aftermath of the global recession in 2008.

Given the recent uptick in housing starts for April and May on 12 -month basis, and recent communications of easier monetary policy by the Central Bank of Canada, there is the possibility that housing starts could return to the run-rate seen in 2018.

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