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“Housing starts weakened once more in September, falling to their lowest level in nearly two years,” points out  the National Bank of Canada’s  Jocelyn Paquet.

Key quotes

“The decline was entirely due to two provinces, B.C. and Alberta, where starts fell a combined 30.8K. Rising interest rates surely contributed in that poor result but we suspect other factors weighed heavily in the balance, namely stricter rules for foreign buyers, a group more active in the condo market where most of the monthly decline occurred. In any case, the latest data on housing starts in British Columbia and Alberta only confirmed a slowdown in the housing market already evident in resale statistics.”

“To be sure, seasonally adjusted sales on the Vancouver secondary market stood at a 66-month low in September. In Calgary, resales were down 12.9% y/y in the same month. Not all was bad in the starts report though. The relatively strong showing in Ontario and Quebec was certainly reassuring following two consecutive monthly drops. Looking at quarterly data, starts at the national level retreated no less than 35.3% in annualized terms in Q3, a result that should translate into a negative contribution to GDP growth from new residential construction in the quarter.”

“Looking ahead, we remain confident that a fairly strong labour market -unemployment is near a cyclical low- will continue to support residential construction throughout Canada, but we’ll keep a close eye on the B.C. market.”