Canada housing data suggests soft landing so far

Tue Apr 9, 2013 11:37am EDT
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By Andrea Hopkins

TORONTO (Reuters) - Canadian housing starts edged higher in March and building permits were weaker than expected in February, reports released on Tuesday showed, offering some reassurance that Canada's housing sector is simply cooling, not crashing.

While housing starts rose for a second straight month, all the strength was in the rural market - urban starts dropped sharply - and a longer-term trend showed construction is continuing to moderate, according to a report from government agency Canada Mortgage and Housing Corp.

Meanwhile, data from Statistics Canada showed the value of Canadian building permits rose a weaker-than-expected 1.7 percent in February as a sharp decline in plans for multi-family housing partially offset strength in other projects.

The reports furnished further evidence of a slowing in Canada's housing market, which was red-hot a year ago but has cooled dramatically since the government tightened mortgage rules in mid 2012 to prevent a U.S.-style real estate bubble.

"So far, so good on the soft landing in Canadian housing," BMO Capital Markets senior economist Robert Kavcic said in a research note, pointing out that starts have receded to just above levels seen two years ago.

"Starts have now bounced back in two straight months since January's deep decline, and the average for all of Q1 sat at a comfortable 177,100. That's ... in line with fundamental demand and probably right about where policymakers would like to see activity."

The seasonally adjusted annualized rate of housing starts was 184,028 units in March, up from 183,207 in February and well above the consensus forecast of analysts in a Reuters poll for 176,500.

But the monthly gain was entirely due to a 24 percent surge in rural starts to the highest level since 2010, a pace one economist said was not sustainable.   Continued...

Builders work on the the roof of a new home under construction in the Montreal suburb of Brossard, August 10, 2010. REUTERS/Shaun Best