* Starts drop in October from the month before
* October's 208,800 starts up from 195,000 forecast
* Market supported by growth in condominiums
By Claire Sibonney
TORONTO, Nov 8 Housing starts in Canada were
higher than forecast in October, supported by low interest
rates, but analysts see a slowdown coming as the global
economic outlook darkens.
Canada Mortgage and Housing Corp (CMHC) said on Tuesday
there were 207,600 starts in October on a seasonally adjusted
annualized basis. That was up from 195,000 forecast by analysts
in a Reuters poll ECONCA>, but still down from an upwardly
revised 208,800 units in September.
CMHC said that condominium construction continued to pace
the market, overshadowing starts on single-detached homes.
Mazen Issa, Canada macro strategist at TD Securities, said
in a note to clients that low interest rates - and the
likelihood that the Bank of Canada will keep them low in the
face of a bleaker economic climate - may continue to support
the housing market.
But he cautioned that tighter mortgage rules, diminished
household spending capacity, and higher five-year mortgage
rates will weigh.
In September there was a third consecutive monthly decline
in building permits issued, and other reports have suggested
markedly weaker economic growth toward the end of the year,
signaled by data showing an unexpected jobs loss and a slower
pace of purchasing activity in October.
Issa said, however, that the housing market in Canada may
continue to look healthy compared with others.
"Broadly speaking, the Canadian economy remains favorably
situated relative to its global peers as headwinds on the
international front have intensified," he said.
Those headwinds - such as Europe's escalating debt crisis,
sluggish global growth and market volatility - have further
pushed back expectations on the timing of the next increase in
the Bank of Canada's benchmark interest rate, currently at 1
Urban multiple housing starts, mainly condominiums,
remained strong in October, while weakness in single starts was
responsible for the slight decline in the overall number.
Ontario led the other provinces due to strength in
condominium construction. "Yep, it was all condos," Robert
Kavcic, economist at BMO Capital Markets said in a note to
"On the supply side, there's a clear divide between singles
and condos, with the latter looking more vulnerable if a
correction does indeed come."
He noted that overall multi-unit starts, climbing for the
past year, jumped 1.7 percent to 123,600, the highest level
since October 2008. Single starts plunged 9 percent to the
lowest level in just over two years.