December 8, 2014 / 1:38 PM / 3 years ago

Canada housing starts climb in November, permits edge up in Oct

A builder works on the the roof of a new home under construction in the Montreal suburb of Brossard August 10, 2010.Shaun Best

TORONTO (Reuters) - Canadian housing starts rebounded as expected in November and building permits edged higher in October, two reports showed on Monday, suggesting the closely watched housing market held momentum heading into the traditionally slower winter season.

A report from the Canada Mortgage and Housing Corp showed the seasonally adjusted annualized rate of housing starts rose to 195,620 units in November, from 183,659 in October.

Analysts surveyed by Reuters had forecast 195,000 starts.

"The result was close to expectations, and continues to suggest that overall homebuilding activity in Canada is running about in line with what is needed to satisfy demographic demand and some replacement," Robert Kavcic, senior economist at BMO Capital Markets, said in a research note.

A separate report from Statistics Canada showed the value of Canadian building permits edged up 0.7 percent in October to C$7.53 billion ($6.61 billion), cooling after the previous month's sharp gain as construction intentions for residential homes slipped.

Economists expected a decline of 1.4 percent after a surge of more than 12 percent in September. The figures are seasonally adjusted.

The Bank of Canada has expressed some concern about household imbalances, particularly a high level of debt accumulated in mortgages as Canadians stretch to get into the nation's expensive housing market. Interest rates are near historic lows and are expected to stay there until late in 2015, fueling heavy borrowing.

Mazen Issa, senior Canada macroeconomic strategist at TD Securities, said the central bank may say more about its concern in a report Wednesday, but its unwillingness to use interest rates to slow debt accumulation may mean housing continues its upward march.

"This Wednesday's Financial System Review will likely explore the issue of household imbalances further but the longer that policy remains ultra-accommodative (despite the economy persistently growing above potential and the conventional output gap effectively closed), the greater the risk that household imbalances accumulate," Issa said in a research note.

Housing starts have slowed from a cyclical peak of about 215,000 a year in 2012, averaging a pace of about 190,000 so far in 2014, Kavcic noted.

Ontario, Quebec and British Columbia showed solid building in November but he said slowing is expected in Alberta in the months ahead as the slide in oil prices slows the provincial economy.

Additional reporting by Jeffrey Hodgson in Toronto and Leah Schnurr in Ottawa; Editing by Bernadette Baum

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