Canadian homebuilders ended the first half of 2023 with their biggest month of the year, reversing a slump in construction activity.
(Bloomberg) — Canadian homebuilders ended the first half of 2023 with their biggest month of the year, reversing a slump in construction activity.
The country saw 281,400 housing starts in June on an annualized basis, based on seasonally adjusted data from Canada Mortgage & Housing Corp. That beat estimates of 220,000 starts in a Bloomberg survey of economists.
Still, the monthly average so far this year — about 235,000 starts — makes it the weakest half since the first half of 2020, when the Covid-19 pandemic was beginning.
Slower construction activity is a headache for Prime Minister Justin Trudeau’s government, which has pursued a strategy of expanded immigration, stretching the housing supply. The country added about 1.2 million people in the 12 months ended March 31; the number of inhabitants recently surged past 40 million for the first time.
But tighter monetary policy and higher financing costs have weighed on builders. The commercial bank prime lending rate has jumped to 7.2% from 2.45% since the beginning of last year, in lockstep with the Bank of Canada’s increases in its policy rate. Sales of existing homes are also projected to decline this year because high mortgage rates are discouraging some people from moving.
Read More: BMO Sees Immigration to Canada Boosting Inflation in Short Term
Despite the population growth spurt, Canada’s construction industry continues to grapple with a shortfall of skilled workers, according to a recent report from the Royal Bank of Canada. That’s one reason home construction costs have soared 51% in three years, it said.
Canada saw nearly 250,000 housing starts in each of the past two years.
The Canada Mortgage and Housing Corporation has estimated that at the current rate of building, by 2030 the country would be short more than 3 million homes, compared with the number needed to “achieve affordability for everyone living in Canada.”
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