UPDATE 2-Canada housing starts jump 11.6 pct, Ontario strong

Wed Dec 8, 2010 10:34am EST

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* Starts rise in November to 187,200 units

* Urban multiples soar 20.9 pct, singles up 5.5 pct

* Ontario leaps ahead, offsets declines in other regions (Adds details, comments)

TORONTO, Dec 8 (Reuters) - Canadian housing starts rose a greater than expected 11.6 percent in November, but most of the gains were in a single province, Ontario, and economists said the home-building industry was still decelerating toward a soft landing.

New home construction rose to a seasonally adjusted rate of 187,200 units in November from a downwardly revised 167,800 units in October, Canada Mortgage and Housing Corp data showed on Wednesday.

The strong rebound, which was well above the 175,000 units forecast by economists, offset the 9.2 percent drop in October, when both single-family and multidwelling starts slid.

The advance was largely due to strength in Ontario, where urban starts surged 82.8 percent, masking declines in other regions.

"While Ontario saw a massive increase in starts in November, most other provinces edged down, highlighting the broader trend toward more moderate and stabilizing activity," said Robert Kavcic, economist at BMO Capital Markets.

Urban starts decreased by 24 percent in Atlantic Canada, by 21.3 percent in British Columbia, by 15.2 percent in Quebec, and by 1.5 percent in the Prairie region.

Overall, starts on urban multiple-dwelling projects, such as condos, soared 20.9 percent in November to 101,800 units, fueled by a surge in the Toronto area.

The focus on multiple-unit dwellings may be a result of changes to regional taxes and mortgage rules this year that may have raised the barriers to home ownership, said Stewart Hall, an economist at HSBC Securities.

"In turn, this may be funneling consumer demand into multifamily housing, which tends to come in at lower pricing points than is the case with single family homes," he said.

After falling in six of the past seven months, starts on urban single-family homes rose 5.5 percent to 61,300 units in November.

The modest rise in the single-family home sector along with the multifamily units are in line with the "mini-renaisssance" in Canadian housing demand, driven by low borrowing rates, TD Securities said.

"Heading forward, we view this release to be consistent with a soft landing in the Canadian housing market, rather than the start of a sustained increase in demand," said Mazen Issa, a macro strategist at TD Securities.

Rural starts in November were estimated at an annual rate of 24,100 units. (Reporting by Ka Yan Ng; editing by Peter Galloway)

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