By Paul Vieira


OTTAWA--Canadian housing starts fell by a steeper-than-expected pace in June, due to sharply lower construction in the country's two costliest real-estate markets, Toronto and Vancouver, British Columbia.

Canada Mortgage and Housing Corp. said Tuesday the data reflect how elevated interest rates are weighing on building activity. "We expect continued downward starts pressure across Canada throughout 2024," said Bob Dugan, chief economist at the federal housing agency and state-owned mortgage insurer.

Housing starts across Canada totaled 241,672 units in June, down 9% from 264,929 in May, CMHC said. Market expectations were for starts on a seasonally adjusted, annualized basis to hit 251,000, according to economists at TD Securities.

The trend measure - a six-month moving average of the monthly seasonally adjusted annual rate of housing starts - fell 0.4% to 247,205 units.

The pace of Canadian housing starts is well below what Canada's Liberal government requires to achieve its goal of roughly four million new homes built by 2031, in an effort to deal with stretched affordability. Economists at TD Bank have calculated the country would need to build 550,000 new units annually to meet its housing goal.

Despite a rate cut in June, housing activity has remained subdued. The Canadian Real Estate Association last week revised downward its forecast for this year and next, citing a weaker-than-usual spring season, a buildup of housing inventory on the market, and a lack of buyers despite the possibility of further cuts in interest rates.

CMHC said annualized housing starts in the second quarter totaled 245,708, which is slightly above the year ago level but down from the previous quarter. CMHC said that in the first half of 2024, housing starts in Canada's six-largest urban areas rose 4% relative to the same year-ago period.

Toronto and Vancouver were laggards, CMHC added, as both markets have seen apartment starts slow "as high interest rates and weak condominium pre-construction sales appear to be affecting these centers negatively."

In Toronto, data indicate that active listings recently reached 16-year highs, a sign that investors -- who banked on steady and healthy price appreciation -- are fleeing the market. The increase in inventory is most notable in the condominium market, Toronto real estate agents say.

In Vancouver, new listings rose in June, 7% from a year-ago, while existing home sales dropped over 19%. Economists at Royal Bank of Canada note that most of the increase in new listings in Canada's third-largest city are from the multi-unit, or condo, category.


Write to Paul Vieira at paul.vieira@wsj.com


(END) Dow Jones Newswires

07-16-24 0906ET