Canadian housing starts decline for a second month in August

[OTTAWA] Canadian housing starts declined for a second month in August, adding to evidence that higher borrowing costs are slowing the market.

Work started on 200,986 homes last month at a seasonally adjusted annual pace, a decline of 2.3 per cent, Canada Mortgage and Housing Corp reported Tuesday from Ottawa. Multiple-unit projects declined by 2.4 per cent and single-detached starts by 2.6 per cent. Economists surveyed by Bloomberg News expected a pace of 216,300 units, according to the median estimate.

New residential construction has been gradually falling from elevated levels late last year and early 2018 as builders cope with the impact of higher interest rates. At the current pace, third-quarter home starts are on track for possibly the slowest quarterly pace since 2016.

"A more sluggish pace to home-building is in line with our expectation that higher interest rates and tighter lending standards turn this former stalwart of growth into a drag on the economy," Royce Mendes, an economist at CIBC Capital Markets, said in a note to investors.

By city, the declines were led by Montreal and Toronto, with respective declines of 35 per cent and 27 per cent on the month. Vancouver starts declined by 2 per cent.

"This moderation brings total starts closer to historical averages, largely reflecting recent declines in the trend of multi-unit starts from historically elevated levels earlier in the year," Bob Dugan, CMHC's chief economist, said in a statement.

BLOOMBERG