One-two punch stuns housing analysts
March 13, 2019
Most analysts were forecasting the pace of housing starts in Canada to remain above 200,000 units in February, so the thump down to less than 175,000 has proven a shock.
Canada Mortgage and Housing Corp. (CMHC) reports the seasonally adjusted annual rate of housing starts fell to 173,153 units in February compared with 206,809 units the month before.
“Higher mortgage rates combined with still favourable, but less stimulative, economic conditions have contributed to softer demand on new home markets in urban centres,” said Bob Dugan, CMHC's chief economist.
The slowing housing starts mirrored a corresponding downward trend in resale housing, which posted the lowest February sales in four years, according to the Canadian Real Estate Association.
The one-two punch to one of Canada’s key industries and employment generators has heightened calls for mortgage relief from the federal government.
Rising cost of home loans and tighter lending rules have been blamed for the slowdown in sales—prompting some to call for changes in the upcoming federal budget.
“I think we will see the mortgage stress test reduced to 1 per cent from 2 per cent,” said Peter Kinch, a mortgage broker based in Metro Vancouver, which has witnessed a near free fall in housing sales over the past year.