Canada’s housing market slowdown, which began with a drop in sales, is now spreading to home construction.
Housing starts in Canada have fallen steeply in recent months as the country’s developers react to a slowdown sales brought on by rising interest rates, tough new mortgage rules and historically poor levels of home affordability.
But the timing is wrong: Population growth has accelerated, and we may now not be seeing enough construction to keep up with demand.
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The number of new housing starts fell to an annual rate of 188,700 in September, according to data released Tuesday by Canada Mortgage and Housing Corp. That’s the lowest in nearly two years and a drop of 23 per cent since June, when the country clocked a rate of 245,000 housing starts, annualized.
“The slowdown in building has coincided with moves toward more restrictive mortgage rules and higher interest rates,” CIBC economist Royce Mendes wrote in a client note.