Canada housing edge higher in April

Home construction rose 1.3 per cent in April as Canada's real estate market continued to show signs of recovery.

Canada Mortgage and Housing Corp. said Monday housing starts rose to a seasonally adjusted annual rate of 201,700 units last month, up from a revised 199,200 units in March. The March number was previously estimated at 197,300 units and initially revised up to 200,900 before the latest change.

Economists had expected starts at around 205,000 units for April.

"Higher multiple starts were nearly offset by a decline in single starts and rural area starts in April," said Bob Dugan, CMHC's chief economist.

Urban starts increased by 5.1 per cent to 182,500 units on a seasonally adjusted annual rate in April. Multiple-unit construction was up 27.2 per cent to 98,600, while single units fell 12.7 per cent to 83,900.

In British Columbia, urban construction rose 16.4 per cent and the Prairie region posted a 6.7 per cent gain. Ontario was up 4.5 per cent and Quebec rose 1.1 per cent, while Atlantic Canada declined 3.3 per cent.

"This was only the second time that the pace of housing starts has breached the 200K-units barrier since November 2008," said Millan Mulraine, senior strategist at TD Securities.

Rural housing starts came in at a rate of 19,200 units in April, down from 25,600 the previous month.

"On the whole, the report underscores the strong recovery in Canadian home-building activity, and the Canadian housing market more generally, as favourable buying conditions continue to spur housing demand," Mulraine said.

"However, in the coming months we expect the pace of activity to moderate as higher interest rates and home prices, and tighter mortgage rules temper demand."

Robert Kavcic, economist with BMO Capital Markets, said although April housing starts were less than expected, the level still represents "a robust level of construction activity." However, he said with housing construction this year going well beyond what had been anticipated, it could be taking away from what the demand will be going into 2011.

"While not back to pre-recession rates of about 225,000 per year, Canadian housing starts have rebounded above the estimated 175,000 rate of household formation, which could limit the upside over the next year," he said in a research note.

Kavcic said he expected cooling in the new-home market to start as soon as the second half of this year as things such as rising mortgage rates and new harmonized sales taxes in Ontario and B.C. take their toll.

(Source: Financial Post/Vancouver Sun)