BUSINESS

Housing starts pick up the pace in September compared with August, CMHC says

10/08/2013 08:56 EDT | Updated 01/23/2014 06:58 EST
OTTAWA - The pace of housing starts picked up in September, boosted by a jump in projects such as condos, townhouses and apartments, Canada Mortgage and Housing Corp. said Tuesday.

The housing agency said starts came in at a seasonally adjusted annual rate of 193,637 last month, ahead of what economists had expected and up from 183,964 in August.

Economists predicted a rate of 185,000 for the month.

"The slight firming in the trend level of housing starts is consistent with the renewed strength seen in the existing home market this year," TD Bank economist Leslie Preston said in a report.

"However, we continue to expect that the extended period of overbuilding in the Canadian housing market is on its last legs. Putting some perspective on today's number, the trend pace of homebuilding is 16 per cent below last year's peak."

The pickup in housing starts came as sales of existing homes in August also gathered steam.

The Canadian Real Estate Association reported last month that August sales through the Multiple Listings Service were up 11.1 per cent from a year ago when Ottawa tightened mortgage rules and sent a chill through the market.

Since then, however, home sales have bounced back, helped by interest rates which, until recently, have remained near record lows.

CMHC said Tuesday that the increase in housing starts came as starts in urban areas rose 4.3 per cent in September to 177,240 units and multiple-unit projects increased 5.9 per cent to 113,705 units.

Urban starts of single-family homes increased 1.4 per cent to 63,535 units.

Royal Bank economist David Onyett-Jeffries said the strength is consistent with the pickup in resales over the past six months.

"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," Onyett-Jeffries said.

"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 Canada."

The six-month moving average of housing starts increased to 190,492 units in September compared with 188,440 in August.

Regionally, the seasonally adjusted annual rate of urban starts increased in Atlantic Canada, the Prairies, British Columbia and Quebec and fell in Ontario.

Rural starts were estimated at a seasonally adjusted annual rate of 16,397.