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Data released on Monday, showed that Housing Starts in Canada rose to an annual rate of 193.5K in May, above the 150K expected.  Kyle Dahms, analyst at the National Bank of Canada, points out they are not expecting May’s level of starts to be sustained in the current economic context.

Key Quotes:

“Housing starts were much stronger than expected for a second month in a row. In May, the growth in construction stemmed from a reopening in Quebec which bounced to a 4-month high. A solid rebound was in the cards for Quebec after starts dropped to 0 in April due to the implementation of strict social distancing rules.”

“On the flip side, starts in Ontario fell to a one-year low from an artificially elevated level in April. Indeed, the likeliest scenario is that homebuilders frontloaded May projects before the April 3rd lockdown (as construction could continue for existing projects).”

“We will be looking towards June’s results in order to get a better snapshot of the post-lockdown residential construction industry in Canada.  Looking at the data on a 6-month moving basis, the trend is not particularly comforting. The combined effect of joblessness and reduced immigration should further taper demand. Moreover, new CMHC standards for mortgage insurance will likely exclude some potential buyers by reducing their purchasing power.”



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