TORONTO (Reuters) - Canadian housing starts fell more than expected in August to hit their lowest since April, hurt primarily by slower condo construction, according to data released on Tuesday that tempered property bubble fears.
The seasonally adjusted annualized rate of housing starts was 180,291 units in August, the Canada Mortgage and Housing Corp said.
This was well below market expectations of 189,500 starts and down from a revised July reading of 193,021 units. The government housing agency had originally reported 192,853 starts in July.
The August figure was the weakest housing start reading since April, when new homes were being built at an annualized rate of 175,922. The average so far this year stands at around 183,200.
“Although today’s report and yesterday’s permits data suggest housing is holding up fairly well, we expect higher mortgage costs, buyer fatigue and recent policy changes to contribute to a more appreciable slowing in the months ahead,” Peter Buchanan, an economist with CIBC World Markets, said in a client note.
The report follows data out Monday which showed building permits hit record levels in July, mostly from robust strength in the commercial sector.
Canadian policymakers have been keeping a close eye on the country’s housing market after record low interest rates helped fuel a post-recession property boom that some fear could be a bubble.
Canada’s Conservative government has stepped into the market several times since the financial crisis, tightening rules on government-insured mortgages to try to slow down the rise in sales, prices, and construction activity.
The most recent intervention last year had cooled the sector, though there were signs of a rebound in the spring.
“Canada’s housing market remains in good shape despite the larger-than-expected decline in August housing starts. Indeed, through the first eight months of 2013 starts are averaging 183,200, essentially right on demographic demand,” Benjamin Reitzes, a senior economist at Bank of Montreal wrote in a note to clients.
“While higher mortgage rates are going to restrain housing sector activity in the second half of the year, the soft landing story remains intact.”
The data on Tuesday showed urban starts fell by 5.8 percent in August to 163,102 homes, primarily a result of an 8.4 percent decline to 104,704 units in the construction of multiple housing units, which includes condos and other multi-family dwellings.
Single urban starts eased a modest 0.9 percent to 58,398.
Urban starts rose in Ontario, were little changed in Atlantic Canada, and fell in all other regions.
Editing by Jeffrey Hodgson and Chizu Nomiyama