January housing starts slow, but still above estimates

Wed Feb 8, 2012 11:05am EST
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OTTAWA (Reuters) - Housing starts declined in January from December, but construction was still stronger than expected and shows little sign of slowing in the multiple-unit segment, according to a report by Canada Mortgage and Housing Corp (CMHC) on Wednesday.

The seasonally adjusted annualized rate of housing starts was 197,900 units, compared with 199,900 units a month earlier. The December figure was revised down slightly from 200,200 units reported previously.

The number of starts was above the consensus expectation of analysts, who had called for 194,000 starts.

"The latest building permits and housing starts data indicate that new housing construction is not slowing down much," said David Madani, economist at Capital Economics.

"Although this is good for economic activity this quarter, we are still concerned about the associated over-building and rising likelihood of a housing slump down the road," he wrote in a note to clients.

Canada's hot housing market helped fuel its quick recovery from a 2008 recession. But more recently it has put policymakers on the alert as rising prices and heavy borrowing by buyers at record-low rates raised fears of a housing bubble.

The Bank of Canada has suggested some markets may be overvalued, and says it is closely monitoring the situation along with the finance ministry and regulators.

Data released by Statistics Canada on Tuesday showed the value of building permits taken out by contractors in December soared to a 4-1/2 year high thanks to a hot condo market in Ontario.

The CMHC report showed the seasonally adjusted annual rate of urban starts fell by 2.8 percent to 176,600 units.   Continued...

<p>A builder works on the the roof of a new home under construction in the Montreal suburb of Brossard in this August 10, 2010 file photo. REUTERS/Shaun Best</p>