By Andrea Hopkins
TORONTO Oct 8 Canadian housing starts rebounded
in September as multi-family construction surged, and the
unexpectedly strong end to the summer suggested homebuilding
will be less of a drag on Canada's economic growth than
The seasonally adjusted annualized rate of housing starts
was 193,600 units last month, up from an upwardly revised
184,000 in August, data from the Canada Mortgage and Housing
Corp showed on Tuesday.
That was well above analysts' expectations for 185,000
starts and recouped August's lost ground. The federal housing
agency had initially said there were 180,300 starts in August.
The robust homebuilding in September was once again a story
of higher construction of multiple-unit structures, typically
condos. Groundbreaking of multiple units were up by 5.9 percent
in the month to 113,705 units, while single-family starts rose a
more modest 1.4 percent to 63,535 units, CMHC said.
"The result was much stronger than the street's
expectations, and with the prior months' figure also revised up
slightly, today's release suggest the homebuilding sector did
better than expected in the late summer/early fall," CIBC World
Markets economist Emanuella Enenajor said in a research note.
Canada's housing market rebounded in the spring and summer
after slowing dramatically in late 2012, when the government
tightened mortgage lending rules to stave off a U.S.-style
While the renewed strength in home sales and home building
have led some economists to believe Canada's real estate market
is inflating once again, economists said homebuilding is likely
to slow in the months ahead as mortgage rates tick higher.
"As we move into 2014, we anticipate that the demand for
housing will moderate as affordability deteriorates against a
backdrop of elevated home prices and rising interest rates and
result in a moderation in new home construction," David
Onyett-Jeffries, an economist at RBC Economics Research, wrote
in a research note.
"Our forecast calls for housing starts to drift lower over
the next year and finish 2014 at 172,000 annualized units, a
level that is more consistent with household formation in
The regional breakdown showed a sharp contrast between
weakness in Ontario, Canada's most populous province, and
strength in the rest of the country.
Starts rose 29.8 percent in Atlantic Canada, 24.7 percent in
the Prairies, 17.4 percent in British Columbia and 5.9 percent
in Quebec, but were down 15.6 percent in Ontario.
The strength in homebuilding in September puts the
third-quarter rate of construction 1.5 percent above the
second-quarter level, according to Scotiabank economist Derek
Holt. That's barely enough to support economic growth.
"Today's release could mean that homebuilding in Q3 ends up
being less of a drag than we previously expected," CIBC's
The Bank of Canada said in July it expects the Canadian
economy to grow by 1.8 percent in 2013, up slightly from 1.7
percent growth in 2012.