January 11, 2010 / 2:49 PM / 9 years ago

UPDATE 1-Canada Dec housing starts up, beats forecast

* December starts stronger than expected

* Both single-family homes and multiples up (Adds details, analysts’ quotes)

TORONTO, Jan 11 (Reuters) - Canadian housing starts rose 5.9 percent in December, their third consecutive monthly gain, beating forecasts and signaling the housing sector continues to lead the country’s economic recovery.

Starts rose to a seasonally adjusted rate of 174,500 units from an upwardly revised 164,800 units in November, Canada Mortgage and Housing Corp said on Monday. The number of starts in December beat economists’ consensus view of 160,000.

Both single-family homes and multi-family homes pushed higher, with singles up 6.4 percent to 79,400 and multiples up 6.7 percent to 77,700.

The data will be a sharp positive for fourth-quarter gross domestic product growth, Scotia Capital said in a report.

“This short-term bonanza, however, means that supply is coming back into a tight market that has thus far been characterized by high prices in part due to supply shortages,” said Scotia Capital’s Derek Holt and Karen Cordes.

The figures reinforced optimism for Canada’s housing sector, even after Monday’s expected fall in building permits for November. [ID:nN11413438]

“Overall, the uptick in Canadian residential starts underscores the improving response of builders to the dramatic rebound in overall Canadian housing market activity,” Ian Pollick, an economics strategist with TD Securities, said in a report.

“It is increasingly looking like the ‘fever’ in the existing home sales market is starting to catch in the new residential housing market,” he added.

In November, housing starts in Canada rose by a smaller-than-expected 0.7 percent, but hit their highest level of the year on an increase in construction of single-family homes.

The construction sector has also been a key source of employment growth.

Last month, while Canada’s broader job market stalled after the economy unexpectedly shed 2,600 jobs, the construction industry added 10,700, according to a report released on Friday.

A rebound in urban starts, up 6.6 percent to 157,100 in December, was the main driver behind the overall rise.

December’s seasonally adjusted annual rate of urban starts increased by 17.8 percent in Quebec, by 15 percent in Atlantic Canada, by 8.7 percent in British Columbia, and by 2.9 percent in Ontario. The rate of urban starts decreased by 3.8 percent in the Prairies.

Rural starts were estimated at a seasonally adjusted annual rate of 17,400 units in December. (Reporting by Claire Sibonney; editing by Jeffrey Benkoe)

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