OTTAWA (Reuters) - Canadian housing starts rose in October and the value of building permits climbed in September, both unexpected gains, as the nation’s housing market remained firm, particularly in the condo market, separate reports showed on Wednesday.
Groundbreaking on new homes rose to a seasonally adjusted annual rate of 222,771 starts in October, bucking expectations for a decline to a 210,000 annual rate and marking five straight months of starts above the 200,000 unit threshold.
September starts were also revised slightly higher
The construction was driven by a 12.5 percent increase in multiple urban starts - typically condos - which offset a 17.1 percent drop in single urban starts, the report from the Canada Mortgage and Housing Corp showed.
The condo market has held strength in both Toronto and Vancouver, Canada’s two largest markets, despite a broader slowdown in overall sales amid rising mortgage rates and a foreign buyers tax imposed in the two cities.
The 12-month tally of multiple starts is the highest since at least 1990, BMO Capital Markets senior economist Robert Kavcic said in a research note.
“Canadian homebuilding activity remains rock solid, backed by demographic support,” Kavcic said, noting that 2017 is on track for the largest number of new units in a decade.
CIBC Economics economist Nick Exarhos said the mild October weather benefited builders.
“All told, the run up in starts through 2017 is a positive omen for residential investment, although already elevated levels of activity mean that there isn’t much room for housing to become more of a positive for the growth outlook,” Exarhos said in a note to clients.
A separate report by Statistics Canada showed the value of Canadian building permits increased 3.8 percent in September, the first rise in three months, on strength in the non-residential sector.
Analysts in a Reuters poll had expected the value of permits to drop by 0.2 percent.
Permits in the non-residential sector jumped 13.9 percent, largely thanks to a permit for a hospital in the western province of Alberta.
Permits in the residential sector declined 1.7 percent from August, the third consecutive month-on-month retreat, on lower construction intentions for apartments in Ontario.
Kavcic said the number of residential units permitted has been steadily fading since peaking in June.
“Given that there’s some lag between permit issuance and projects breaking ground, we could see starts settle back down somewhat in the latter stages of the year,” Kavcic said.
Reporting by Andrea Hopkins; Additional reporting by David Ljunggren; Editing by Frances Kerry