Morning Market Brief: Tuesday, May 16, 2023

Housing starts suggest Canadian real estate market is warming

More new residential construction projects began in April than economists expected. Benchmark home prices also increased, rising by 1.6% in April compared to March. It could be a sign the real estate sector may heat up over the summer months.?

• Housing starts increased by 22% to 261,600 in April according to the Canada Mortgage and Housing Corporation. Multi-unit starts drove the increase, jumping by 33%, while single-unit starts declined slightly.
• Record-high population growth in 2022 and beyond could sustain demand. Canada welcomed over 437,000 new permanent residents last year. However, housing supply remains low. Higher housing starts could help alleviate the underlying housing shortage.
• Existing home sales increased by 11.3% in April, as reported by the Canadian Real Estate Association. Sales rose in both Toronto and Vancouver.

The Bank of Canada (BoC)’s pause in interest-rate increases seems to have steadied the market and encouraged potential buyers to re-emerge from the sidelines in search of deals. However, supply is still not expanding quickly enough to meet demand. Keep an eye on the release of Canada's latest inflation data today, as it could affect the BoC’s interest-rate decision and overall demand for housing.

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