May housing starts up more than expected

Wed Jun 8, 2011 11:09am EDT
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By Jeffrey Hodgson

TORONTO (Reuters) - Canadian housing starts rose in May to a higher-than-expected seasonally adjusted annual rate of 183,600 units, boosted by a pickup in condominiums and other multi-unit buildings.

May starts topped the median forecast of analysts, which had called for 183,000 starts. April starts were revised slightly lower to 178,700 units from 179,000 units, Canada Mortgage and Housing Corp said on Wednesday.

Unlike the United States, Canada's relatively healthy housing sector played a key role in pulling the economy out of its recent recession. But growth has cooled following last year's interest rate hikes and the introduction of tighter mortgage rules.

CMHC, a government agency, said May starts increased modestly due to an increase in multi-unit construction in most provinces and higher starts in rural areas.

This was partly offset by fewer new single-family homes, which typically have a bigger economic impact.

The report provides "some support to economic growth. However, all of the strength was in the multi-family segment as single starts declined on the month suggesting that the lift to growth will be modest," Scotia Capital economists Derek Holt and Karen Cordes Woods said in a note to clients.

"The trend remains pointed downwards as tighter mortgage regulations, record high prices and high levels of homeownership continue to limit demand for new homes, likely resulting in a more moderate pace of growth for home prices."

Canadian housing prices and sales surged shortly after 2008 financial crisis, boosted by near-zero interest rates and ultra-low mortgage costs. Canadian banks also exited the crisis relatively unscathed and were able to continue lending.   Continued...

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