TORONTO (Reuters) - Canadian housing starts fell 9.2 percent in October, sliding to their lowest in more than a year, data indicated on Monday, suggesting the slowing housing market could become a drag on economic growth.
New home construction fell to a seasonally adjusted annual rate of 167,900 units from a downwardly revised 185,000 units in September, Canada Mortgage and Housing Corp said on Monday.
The number came up short of analyst forecasts for 183,000 starts. September starts were previously reported at 186,400 units on an annualized basis.
It was the fifth monthly decline in the six months since new home construction came close to a two-year high in April, and the lowest level of starts since September 2009.
“Canadian housing demand has cooled significantly this year, and supply now appears to be following,” said Robert Kavcic, an economist at BMO Capital Markets.
A powerful source of economic growth for much of the past decade, the Canadian housing sector began to slow after the recession and the cooling has accelerated in recent months.
Data shows that home sales have slowed, construction has moderated and prices are showing signs of stabilizing after a period of sharp increases.
The heated activity in all corners of the housing market was a major reason that residential mortgage credit expanded rapidly to top C$1 trillion as of August 2010, a separate report showed on Monday.
The gain marked a 7.6 percent rise from the year before, the Canadian Association of Accredited Mortgage Professionals said of its annual mortgage survey. Data was collected from various sources, including an online survey of 2,005 Canadians. More than one-half of the sample were homeowners with mortgages.
The association described growth over the past year as “quite strong” and said coming years should bring slower, but historically solid, growth, even with buying activity and housing construction slowing.
It estimated the amount of outstanding residential mortgage credit will rise by about 7 percent this year to C$1.028 trillion ($1.028 trillion), with growth easing to a 6.5 percent pace in 2011, and close to 6 percent in 2012. That compares to average growth rates of 10.7 percent a year between 2004 and 2008, when the housing market was booming.
The report also showed Canadian homeowners were comfortable with their mortgage debt and believe they can handle an increase in interest rates.
Starts of closely watched urban single-family homes declined 8 percent in October to 57,700 units, while urban multiples, such as condos, fell 15 percent to 84,700 units.
CMHC said the moderation in monthly housing starts from “relatively high” levels earlier in the year was consistent with its projection of 184,900 units this year. It estimates about 175,000 units next year.
Regionally, starts were lower by a province-leading 24.5 percent in Ontario, followed by a 16.9 percent drop in the Prairie region. Starts in British Columbia fell 9.1 percent and were down 2.6 percent in Quebec. Atlantic Canada was the only region to report an increase in new home construction in the month, up 32.9 percent.
Rural starts were estimated at a seasonally adjusted annual rate of 25,500 units in October.
Canada’s commercial real estate market, meantime, is perceived to be on a relatively stable trajectory in its overall market conditions.
The REALpac/FPL Canadian Real Estate Sentiment Survey, which surveys real estate players’ current and future outlooks, found respondents felt “market conditions are a little better than they were 12 months ago, and they think things are going to be a little better 12 months from now.”
“Market conditions are not getting worse, but they’re not really trending up.”
A separate survey, by Colliers International, indicated on Monday that Canada’s largest institutional and private real estate investors think that the market has reached rock bottom and is on the verge of an upswing.
The survey found 89 percent of Canadian respondents said they intend to invest at home, with Toronto topping the list of the preferred investment destinations by 26 percent, followed by 18 percent in Vancouver.
Reporting by Ka Yan Ng; editing by Frank McGurty