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TORONTO (Reuters) - Canadian housing starts jumped a higher-than-expected 7.3 percent in September, helped by a surge in the condominium sector, suggesting Canada's property boom stayed intact last month and should help the economy avert recession.
Canada Mortgage and Housing Corp said on Tuesday that starts rose to a seasonally adjusted annualized rate of 205,900 units last month. August starts were revised up to 191,900 from 184,700.
The median forecast in a Reuters poll was for 188,000 starts in September.
"Canadian housing remains quite healthy. Tailwinds including low mortgage rates and a solid job market will continue to be offset by headwinds including shaky consumer confidence and high housing valuations, pointing to only a slightly softer pace of activity in the year ahead," Robert Kavcic, an economist with BMO Capital Markets, said in a note to clients.
Driving the gains was a jump in construction of multi-residential buildings such as condominiums. The government agency pointed to increased starts of so-called multiples in the Atlantic region, Quebec and British Columbia.
"Multiple housing starts are expected to move back toward levels consistent with demographic fundamentals in the near term," Mathieu Laberge, a deputy chief economist with CMHC said in a statement.
The agency said urban starts increased by 8 per cent to 185,900 units in September, with multiple urban starts up by 14.2 per cent to 118,000 units. Single family housing starts in urban areas decreased by 1.5 percent in September to 67,900 units.
Rural starts were estimated at 20,000 units.
CIBC World Markets economist Emanuella Enenajor said in a note that while multiple starts are widely expected to scale down in the months ahead, residential construction could be a plus for GDP in the third quarter.
Canada's economy contracted marginally in the second quarter, partly due to the supply chain impact of Japan's earthquake and tsunami. There had been fears the economy could shrink again in the third quarter, meeting the textbook definition of a recession.
But recent data has been encouraging. A report on Friday showed Canada created six times as many jobs as expected in September, helped by an economy that is largely humming along even as other rich nations struggle with debt and slumping confidence.
"In the context of a darker international landscape, the momentum in domestic activity reflected in the housing market will play an important role in helping the Canadian economy maintain its head start among developed market economies in emerging from the 2008 recession," David Tulk, chief Canada macro strategist with TD Securities, wrote in a note.
Canada's housing sector has played a major role in its economic recovery. The country avoided the subprime housing boom and collapse that drove the United States into recession and helped trigger the global financial crisis.
Property prices and sales briefly weakened after the crisis. But the Bank of Canada's decision to cut interest rates to a record low pulled mortgage rates lower and fueled fresh growth.
The housing market was helped by the fact Canada's conservative banks escaped the crisis largely unscathed and were able to keep lending. The fear now for many policymakers is a fresh asset bubble could be in the works.
Still, most analysts say the housing sector is likely to cool in the year ahead. Government changes to mortgage rules aimed at preventing a bubble have helped curb demand. The weak U.S. economy -- destination for most of Canada's exports -- and financial market volatility have also hurt sentiment.
"The bigger question concerns what happens to housing in Q4, given upward past revisions that now pose a higher base effect, and the sharp decline in building permits that was registered in last week's release," Scotia Capital economists Derek Holt and Karen Cordes Woods said in a note.
The value of building permits unexpectedly tumbled 10.4 percent to C$5.9 billion ($5.7 billion) in August from July for the second straight monthly decline, Statistics Canada reported on Thursday.
Editing by Rob Wilson