Canadian house starts solid, seen staying that way

Mon Jun 9, 2008 10:57am EDT
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By John McCrank

TORONTO (Reuters) - Canadian housing starts rose slightly more than expected in May, avoiding the cliff that U.S. starts fell off in the first several months of the year, as demand for new homes remained strong across the country, a report released on Monday showed.

Housing starts climbed 3.5 percent in May to a seasonally adjusted annualized 221,300 units from 213,900 units in April, according to Canada Mortgage and Housing Corp, a government-owned corporation.

That beat the consensus expectation of analysts for 220,000 starts.

"While not exactly earth-shattering news, the main story line here is that Canadian building activity remains quite healthy in continued contrast to the world-famous collapse in U.S. housing," said Doug Porter, deputy chief economist at BMO Capital Markets, in a note.

"Notably, in the first five months of 2008, starts in Canada were actually up 0.7 percent from the same period a year ago, versus a 28.9 percent year-on-year drop in U.S. starts so far this year."

Housing starts increased in every province except Ontario, where they declined 7 percent.

"However, Ontario housing starts are averaging close to 77,000 units year-to-date and are still poised to record a significant increase in starts over the 2007 average level of 68,000 units," said Pascal Gauthier, economist at TD Economics.

Elsewhere, starts in urban centers in the Atlantic region rose almost 19 percent, Quebec had a 17 percent rise, the Prairie regions had 14 percent growth, and British Columbia was up 1.4 percent.

Nationally, urban single family dwellings climbed 1.9 percent to 116,100 units from 113,900, while urban multiples rose 7.3 percent to an annual rate of 76,700 units from 71,500 in April. Rural starts in May were estimated at an annual 28,500 units, unchanged from April.

"The takeaway message is that while homebuilding is unlikely to carry as much weight in fostering employment and growth as it had in 2005-07, it also looks unlikely to be a source of significant weakness for the Canadian economy going forward," Gauthier said.