Canadian housing starts drop sharply in August

Fri Sep 9, 2011 9:31am EDT
 
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TORONTO (Reuters) - Canadian housing starts fell much more than expected in August, a sign that a weaker jobs market, tighter mortgage rules and deeply indebted households are beginning to cool the country's hot housing market.

Starts, driven by a drop in multiple-unit buildings such as condominiums and tracking losses in construction jobs, slipped to a seasonally adjusted annualized rate of 184,700 units from a downwardly revised 204,500 units in July.

The number of starts missed the consensus expectation of analysts, who had called for 200,000 starts.

"Broadly speaking, the theme of a gradual moderation in the housing market has largely played out thus far this year," Mazen Issa, Canada macro strategist at TD Securities, said in a note to clients.

"Heading forward, we expect this theme to continue."

Issa said that with the Bank of Canada expected to keep interest rates on hold for the foreseeable future, there is a chance the housing market will rebound. But the strategist noted the central bank will likely rely more heavily on tighter mortgage regulations to prevent housing market "excesses."

(Reporting by Claire Sibonney; Editing by Jeffrey Hodgson)