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Canadian Housing Starts Trending Lower Amid Weak Market Conditions, TD Says

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Canadian housing starts are expected to continue trending lower through the remainder of the year, as weak demand, elevated inventories and softer pre-construction sales weigh on residential construction activity, said TD Economics Thursday.

While the recent removal of the Harmonized Sales Tax on new builds in Ontario could support demand, the impact is unlikely to be felt until next year or 2028, given the typical lag between pre-sales and construction starts, wrote the bank in a note after Canada Mortgage and Housing Corporation (CMHC) released June's housing starts data on Thursday.

"Q2 activity was broadly in line with Q1, undershooting our expectation for a mild pickup," wrote TD Economist Marc Ercolao in the note.

Canadian housing starts declined to an annualized 238,900 units in June, down 6% from May on a month-over-month basis, according to CMHC.

"June's drop is consistent with our view that housing starts are set to grind lower as the year wears on," added Ercolao.

Additional headwinds facing homebuilding include slower population growth, rising rental vacancy rates, and elevated unsold housing inventories, said the bank.

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