OTTAWA (Reuters) - Canadian housing starts unexpectedly cooled in October as builders broke ground on fewer multiple-unit homes, including apartment buildings and condominiums, data showed on Monday.
The seasonally adjusted annualized rate of housing starts declined to 183,604 units last month from a revised 197,355 units in September, according to a report from the Canada Mortgage and Housing Corp, the country’s national housing agency.
The latest result fell short of analysts’ forecasts for 200,000. September was originally reported as 197,343.
The robust housing market that emerged in Canada following the global financial crisis has raised concerns that home prices could be due for a pullback, though policymakers have stressed recently that price gains are concentrated in the major cities of Toronto, Vancouver and Calgary.
Housing construction has been resilient this year, bouncing back from weather-related weakness in early 2014.
“While recent home prices trends are starting to raise some eyebrows, there’s little concern about overbuilding in Canada, with housing starts trending near fundamental requirements,” Robert Kavcic, senior economist at BMO Capital Markets, wrote in a note.
Groundbreaking on multiple dwellings dropped nearly 14 percent to 98,673 units, while construction on single detached homes edged up 5.6 percent to 66,010.
The drop in multi-unit dwellings also weighed on the overall six-month moving average for housing starts, which declined to 195,707 from 197,763.
“Given the elevated level of condominium units under construction, our expectation is that condominium starts will continue to trend lower over the coming months,” said Bob Dugan, CMHC’s chief economist.
Construction in urban centers declined in all five regions covered in the report, led by a 15.6 percent drop in British Columbia. Rural starts across the country slipped by 6.8 percent.
Analysts expect that eventual higher interest rates will take some heat out of the housing market. Although the Bank of Canada has indicated it will not raise rates anytime soon, the prospects look good for the U.S. Federal Reserve to hike rates by the second half of next year, which will tighten financial conditions globally, Mazen Issa, senior Canada macro strategist at TD Securities, wrote in a note.
“As such, we do not see much scope for housing construction in Canada to run too much higher in the near-term and eventually should begin cooling by the end of 2015,” Issa said.
Editing by W Simon and JS Benkoe