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Economic News

Canada: How The Grinch Stole Housing Starts in December

January 16, 2025
Kari Norman
Economist

Highlights

  • The pace of housing starts in Canada pulled back to 231.5k (saar) in December, after an unusually strong print the month before. Most of the decline was in multi-family housing. Table 1 below summarizes key data points.
  • Our Q4 2024 tracking for real annualized GDP growth is close to 2.5%, above the Bank of Canada’s (BoC) 2.0% from the most recent Monetary Policy Report.

Implications

December housing starts pulled back to 231.5k from November’s 262k, coming in below the consensus of economic forecasters (250k). This placed the Q4 2024 average at a more typical 248k. Looking at the year as a whole, housing starts were up a modest 3k, after falling nearly 21k in 2023.

Multi-unit construction dropped 29k in December after an unusually strong print the prior month. The average for multi-unit starts in 2024 came in about the same as 2023. Single-unit residential construction, which comprises a much smaller share of new homebuilding, also slowed in December. Looking at longer trends, construction of purpose-built rental apartments has outpaced condos for the fourth year in a row (graph 1). Single detached homebuilding increased in 2024 but remained below any other year in the past decade.

Regionally, home construction picked up in Ontario to 65.3k but trailed the 2024 average and remained well below last year’s 90k starts. Much of this was a Toronto story, with construction down 19% y/y. Housing starts in Quebec declined in December after an exceptionally strong print the month before. But 2024’s average of almost 49k came in well above the prior year’s 40k. The Atlantic provinces all had a good year, with starts advancing well over 2023 levels.

In 2021 and 2022, high inflation in building costs plagued the residential construction industry. However, the new housing price index appears to have stabilized across most major Canadian cities (graph 2). If high and retaliatory tariffs come to pass, we could see a reignition of inflation in building materials in 2025.

The industry continues to face persistent headwinds including low builder confidence, an aging workforce, and elevated borrowing costs. This is in addition to broader economic challenges posed by an anticipated slowing in population growth External link. and tariffs proposed by the incoming US administration External link.. With this in mind, we remain of the view that the Bank of Canada will reduce its policy rate again this month by 25bps. This should be followed by a pause in March and then a continued pace of gradual rate cuts through the rest of 2025.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.