OTTAWA (Reuters) - Canadian housing starts slowed slightly in March and building permits dipped in February, but overall residential construction activity remained strong despite a housing correction in some areas, separate reports showed on Tuesday.
The seasonally adjusted annual rate of starts declined to 225,213 in March from February’s upwardly revised 231,026, the Canada Mortgage and Housing Corp said. Economists had forecast a sharper decline to 218,000 homes.
A 7.3 percent drop in starts of multiples - typically condos - offset a 9.5 percent increase in construction of detached homes, the report showed.
A separate report from Statistics Canada showed the value of Canadian building permits dipped by 2.6 percent in February, in part due to lower construction intentions for single-family homes in Ontario.
The value of permits for single-family dwellings edged lower by 1.6 percent, pulled down by a 6.9 percent decline in Ontario, Canada’s most populous province. Toronto, the country’s largest city, recorded a 13.6 percent decrease, the report showed.
Taken together, the two reports showed continued strength in homebuilding despite signs of a market correction in Toronto and Vancouver. In those two cities, sales and prices have declined since fears of a bubbled prompted the government and regulators to tighten mortgage rules and raise taxes on foreign buyers.
“Robust residential construction activity continues, led by the major markets. The correction we’re seeing (Toronto now and Vancouver recently) still remains largely an asset price phenomenon at the higher end of the market, with underlying demographic demand still strong,” Robert Kavcic, senior economist at BMO Capital Markets, wrote in a research note.
Still, analysts expect the pace of homebuilding to slow as the mortgage rule changes dampen demand, particularly among first-time homebuyers who have to save more for downpayments to get into the market.
“The pace of starts has been running ahead of what would be expected given the data we have on building permits. We continue to expect that homebuilders will break ground at a slower rate over the remainder 2018 as the combined effects of higher interest rates and B20 (mortgage) rules keep a lid on growth in the sector,” Royce Mendes, economist at CIBC Capital Markets, said in a note to clients.
Editing by Bernadette Baum