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Summary
- The pace of housing starts in Canada declined on a monthly basis to 242,777 units in February 2021.
- Despite the decline, the national trend in housing starts “remained elevated" in February.
- The number of new houses being built, aka house starts, hit a record high of 262,396 units in August 2020 on an annualized basis.
While the average house selling price zoomed to record highs in February 2021 for Greater Toronto Area (GTA), the pace of housing starts in Canada declined last month.
According to a study by Canada Mortgage and Housing Corporation (CMHC), the trend in housing starts fell from 244,963 units in January to 242,777 units in February 2021.
CMHC's chief economist Bob Dugan, however, pointed that despite the decline, the national trend in housing starts “remained elevated" in February.
The number of new houses being built, aka house starts, hit a record high of 262,396 units in August 2020 on an annualized basis, which was the highest monthly total Canada had recorded since September 2007.
A Peek Into Canada’s Housing Starts Data
CMHC says that it uses the ‘trend measure’, which is based on the monthly seasonally adjusted annual rates (SAARs) of housing starts, to record the swings in estimates and get a clearer picture of Canada's housing market.
In terms of standalone monthly SAARs, Canada recorded housing starts of 245,922 units in February. This was a sharp fall of 13.5 per cent from January’s 284,372 units.
Housing starts in urban areas particularly saw a 14 per cent month-over-month (MoM) decline in monthly SAAR for February. In rural areas, housing starts were estimated at a monthly SAAR of 14,880 units.
Canada In A Housing Market Crisis?
Canada’s housing market has been a hot topic of discussion since home sales and prices began going through the roof amid the pandemic last year following the historic decrease in interest rates.
Amid the debate over a ‘real estate bubble’, or a ‘housing bubble’, beginning to haunt in Canada, economists claim that the surging home prices reflect a deeper problem – mounting debts.
©Kalkine Group 2021
Some experts in the field have noted that the record low interest rates and climbing homes sales point towards a scenario where Canadians are taking on more loans than they can afford to pay off against their current income. And this could pose a threat to the healing economy in the future.
Canada’s household debt to disposable income ratio, which reflects the average portion of the disposable income that a household owes in debt, expanded to 170.7 per cent in the third quarter of 2020, as per Statistics Canada.
Bank of Canada governor Tiff Macklem had discussed in October last year how cumulative debt levels could lead to financial vulnerabilities in the future. Mr Macklem had added that in case too many households become “dangerously over-leveraged”, Bank of Canada has access to macroprudential tools that it can use.
©Kalkine Group 2020
The BoC chief had also assured in his address that the government will be keeping a watch on the housing markets to ensure that borrowers accessing loans to purchase homes do not take on debts that outsize their income.
At the moment, the daunting concern that remains for many Canadians is how much the rising levels of debts will impact the mortgage rates in the future.
