TORONTO (Reuters) - Canadian housing starts fell more than expected in December due to harsh winter weather, but 2007 still came in as the second strongest year for starts in almost two decades, Canada Mortgage and Housing Corp said on Wednesday.
Housing starts fell 19.6 percent to a seasonally adjusted annualized rate of 187,500 in December from an upwardly revised 233,300 starts in November.
The result missed the consensus forecast of analysts polled by Reuters for 221,000 starts, and sent the Canadian dollar to its lowest level in three weeks.
“Clearly this was a very weak report, driven by a combination of the unseasonably cold weather in December, the tightening credit conditions, and the new land transfer tax in Toronto,” Millan Mulraine, an economics strategist at TD Securities, wrote in a note.
Starting on February 1 home buyers in Toronto, Canada’s largest city, will pay the city a new land transfer tax, which some analysts predict will slow demand.
Mulraine expects improved weather conditions in January to help support a rebound in housing starts to kick off 2008 but said starts will moderate this year from 2007 levels.
Urban single-detached homes declined 12.6 percent to 85,600 units in December from 97,900 in November, while urban multiple dwellings fell 33.7 percent to an annual rate of 66,000 units from 99,500.
Rural starts in December were estimated at an annual rate of 35,900 units, unchanged from November.
“With weather exerting a negative influence on building activity in December, the sharp drop in housing starts shouldn’t be seen as the prelude to a U.S.-style meltdown in the coming year,” Robert Hogue, a senior economist at BMO Capital Markets, wrote in a note.
“Nonetheless, the sector’s strong momentum of the last several years is expected to slow moderately, as rising economic uncertainty throws some sand in the housing engine.”
The weak data shook the Canadian dollar, sending it down to 99.02 U.S. cents, valuing a U.S. dollar at C$1.0099, from a pre-data level around 99.55 U.S. cents, or C$1.0045.
For 2007, housing starts were estimated at 229,600, up 1 percent from 2006, which CMHC attributed to low mortgage rates, solid employment, income growth and a high level of consumer confidence.
It forecast housing starts would fall 6.7 percent to 214,300 units in 2008.
“The housing market in Canada will still remain quite healthy moving into 2008, especially compared to the U.S., where the housing market peaked at the end of 2005 and has been in freefall ever since,” Karen Cordes, an economist at Scotia Capital, wrote in a note.
“This strength will continue to come from employment and income growth and low mortgage rates.”