December 8, 2015 / 1:37 PM / 3 years ago

Canadian housing starts, building permits show strength

TORONTO (Reuters) - Canadian housing starts rose unexpectedly in November and building permits surged in October, fueling Canada’s prolonged housing boom even as the nation’s weak economy contributed to underlying softness in some regions, reports showed on Tuesday.

Real estate for sale in City of Lloydminster following a tour of Gear Energy's well sites near Lloydminster, Saskatchewan August 27, 2015. REUTERS/Dan Riedlhuber

Groundbreaking on new homes jumped to 211,916 units last month from a downwardly revised 197,712 units in October, bucking expectations for a softening to 197,300 starts, a report from the Canadian Mortgage and Housing Corp showed.

The continued strength in homebuilding was concentrated in condo building and in two regions - Ontario and the Prairies - and left economists wondering at a patchy housing boom that was not expected to last as long as it has.

“The strength in Canadian housing construction this year has been somewhat of a mystery,” Derek Holt, vice president of Scotiabank Economics, said in a note to clients.

The Bank of Canada has cut rates twice this year to help bolster the economy against slumping oil prices.

Robert Kavcic, senior economist at BMO Capital Markets, noted a surge in starts in the energy heartland of the Prairie provinces - Alberta, Saskatchewan and Manitoba - which has been hard-hit by the long slump in oil prices.

“Regionally, the Prairies were curiously strong in November, led by a hefty gain in Alberta,” he said in a research note.

Canada’s housing market has been growing since 2009, despite a tepid economy. While analysts have long warned the market is at risk of a correction and some have predicted a crash, most believe a soft landing will happen eventually.

The Bank of Canada has kept official interest rates at historic lows for years in a bid to stimulate the economy, leaving federal government policymakers mulling tighter mortgage lending regulations to deal with the housing boom.

“Canadian homebuilding activity remains robust, and accelerating momentum through the latter stages of 2015 will likely catch the eye of policymakers currently stewing over the strength in real estate. Like the resale market though, the real strength is concentrated in a few local areas,” Kavcic noted.

A separate report from Statistics Canada showed the value of Canadian building permits surged by a higher-than-expected 9.1 percent in October from September, the first increase in three months. Analysts surveyed by Reuters had expected an increase of 3.2 percent.

Construction intentions for multi-family dwellings and institutional buildings in Alberta led the gain as contractors sought permits before new building code regulations came into force.

Additional reporting by Jeffrey Hodgson in Toronto and Leah Schnurr and Simon Doyle in Ottawa; Editing by Alistair Bell

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