TORONTO (Reuters) - The Canadian housing market cooled further in the summer, with reports on Monday showing fewer than expected housing starts in July and the smallest year-over-year new-home price increases in six years in June.
Canadian housing starts fell 14.8 percent in July to a seasonally adjusted annualized 186,500 units from 215,900 units in June, Canada Mortgage and Housing Corp. said.
That missed the consensus expectation of analysts for 210,000 starts.
“Falling sales, tighter lending standards, slowing economic activity and declining confidence all point to downward pressure in the coming quarters, though not to the extent that we’ve seen south of the border,” said Robert Kavcic, economist at BMO Capital Markets in a note to clients.
The U.S. housing market has been battered by a crisis that started in its subprime mortgage sector and spread to other sectors of the market and economy. U.S. housing starts in June saw an uptick that was attributed to a change in New York building codes. The month before that, U.S. starts fell to their lowest level since March 1991.
In Canada, much of the decline in new residential construction in July was in the province of Ontario, down 38 percent. Ontario is Canada’s manufacturing heartland and has been hit hardest by the slowing U.S. economy.
But there may be more factors at work, said Stewart Hall, markets strategist at HSBC Canada.
“Ontario has experienced its rainiest summer in decades which tends to support the idea that the magnitude of the construction decline may have more to do with weather than (being) entirely economic related,” he said.
Urban singles in Canada declined 6.6 percent to 69,800 units in July from 74,700 in June, while the more volatile urban multiples segment fell 20.2 percent to an annual 91,600 units in July from 114,800 in June. Rural starts in July were estimated at an annual 25,100 units from 26,400 in June.
The CMHC is forecasting over 200,000 housing starts in Canada in 2008, which would mark the seventh consecutive year above that level.
In a separate report, Statistics Canada said the price of new homes climbed 0.1 percent in June from May and 3.5 percent from June 2007, the slowest pace in six years due to softening markets in Western Canada.
The monthly gain was in line with analysts’ median forecast in a Reuters poll and followed two months of unchanged prices.
The tamer data may help the Bank of Canada keep inflation in check even as consumers continue to be hit by high gasoline and food prices.
The average selling price of new homes had increased 4.1 percent year-on-year in May.
But with overheated housing markets in Western Canadian cities such as Saskatoon, Edmonton and Alberta cooling, June’s national year-on-year price increase is the smallest since March 2002, when prices rose 3.4 percent.
Homebuyers in Regina faced the biggest price hike, with a 28.5 percent increase in June from a year earlier. St. John‘s, Newfoundland registered the second-largest increase at 22.2 percent, overtaking Saskatoon.
Additional reporting by Louise Egan in Ottawa; Editing by Bernadette Baum