CANADIAN housing starts plunged 22 per cent in November from the previous month and missed estimates by a wide margin, data from the national housing agency showed on Friday (Dec 15).

This came as higher borrowing costs hurt groundbreaking on multiple-unit and single-family detached urban homes.

The seasonally adjusted annualised rate of housing starts fell to 212,624 units from a downwardly revised 272,264 units in October, the Canadian Mortgage and Housing Corporation (CMHC) said.

Economists polled by Reuters had expected starts to decrease to 257,100 in November.

“The notable drop in the rate of housing starts in November, particularly in the multi-unit space, should not come as a major surprise and reflects tighter economic conditions impacting construction timelines,” said CMHC deputy chief economist Kevin Hughes.

“As the more difficult borrowing conditions and labour shortages now seem to be showing in the starts numbers, we can expect to see continued slower starts rates in the coming months,” he added.

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The monthly fall in starts follows data from the Canadian Real Estate Association on Thursday that showed home sales had also declined in November, in a sign of broad cooling in the housing market. The data also showed the benchmark price of a home fell 1.1 per cent in November from a month earlier. This was the biggest decline since September 2022 and the third decrease in a row.

A sharp drop in new building starts will further aggravate a housing crisis in Canada and hurt the popularity of Prime Minister Justin Trudeau. His Liberal government has made housing its top priority and has announced a series of measures, including a plan to convert federal properties into new homes by March and to identify more public buildings for home conversion.

CMHC projects that if current rates of new construction continue, the housing stock will increase to close to 19 million housing units by 2030, but the country needs to build an extra 3.5 million units by that time to restore affordability.

A six-month moving average measuring the monthly trend of housing starts moved up 0.7 per cent in November from October, data showed.

The Bank of Canada has raised its key policy rate to a 22-year-high of 5 per cent to cool inflation, which has remained above the bank’s 2 per cent target for 31 months. Most economists forecast that upcoming mortgage renewals at higher rates will take another chunk out of growth next year.

The central bank last week called for policy changes to spur more housing construction and reduce pressure on inflation caused by a lack of shelter, especially at a time of record immigration. REUTERS