Housing pace cools on fewer condo starts

April 13, 2010

Canadian housing starts cooled for the first time this year in March as condominium construction eased.

Housing starts fell 1.5 per cent last month to 197,300 units on a seasonally adjusted annual basis as builders broke ground on fewer multiple-unit dwellings, Canada Mortgage and Housing Corp. said yesterday.

National starts have been generally rising in recent months as Canada's real estate market steams ahead. While last month's reading was little changed, several factors suggest the market remains strong: February's revised numbers show starts climbed above the 200,000 mark for the first time since October, 2008. And single home construction hit a four-year high in March.

Multi-unit construction, meantime, tends to be volatile, with the March drop following a month-earlier increase.

The pace of housing starts - and broader real estate activity - will likely ease in the second half of this year as mortgage rates rise and new tax regimes and regulations dampen the market, economists said.

"It's a bit hard to believe starts will hold at this level," said Pascal Gauthier, economist at Toronto-Dominion Bank.

Canada requires a pace of housing starts of about 175,000 to 185,000 to keep up with demographic demand, economists estimate.

In March, urban multiple starts fell 15.2 per cent while single-family starts grew 6.9 per cent.

The findings echo a report last week, showing building permits eased due to a lull in multiple-unit activity. Building permits fell for the second month in a row in February, sliding 0.5 per cent in the month.

Single starts are now running at a four-year high. "Activity in this sector is now up 126 per cent from the recession low and ... has seen 11 consecutive monthly gains since bottoming in April last year," Bank of Montreal economist Robert Kavcic said.

Starts fell 16.3 per cent in British Columbia, 15.5 per cent in Ontario, and 8 per cent in Atlantic Canada. They rose 13.5 per cent in Quebec and 7.3 per cent in the Prairies.

Rural starts were estimated at 22,100 units in March.

Levels in January and February were revised upward. In January, they rose 7.5 per cent to 189,000, and in February, the new reading shows they rose 6 per cent to 200,400 units.

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