Canadian housing starts rose 8.1% to an annualized pace of 224,900 in August from 208,000 in July (previously reported as 208,500). The monthly increase in home building activity comes in contrast to market expectations going into the report for a decrease to 200,000 annualized units. The overall gain in August mainly reflected strength in the volatile urban multiples component, which jumped 15.5% to 141,600 annualized units, the highest level since April. Urban single-unit starts rose as well, but by a more modest 0.2% to 64,300 annualized units, while rural starts dropped 10.4% to 19,000.
On a regional basis, the strength in housing starts in August was concentrated in Atlantic Canada (+47.5%), Ontario (+20.4%) and British Columbia (+18.2%) as these regions saw substantial gains in the construction of multiple-unit accommodations (up 90.0%, 26.6% and 33.1%, respectively, in the month). The Prairies saw a more modest increase (+1.3%) as the increase in multiples more than offset the decline in singles-unit starts, while a 13.3% decline in multiples drove the overall 9.8% drop in starts in Quebec.
New home construction in Canada continued at a robust pace in August and extended the monthly streak of above-200,000 unit readings to nine, the longest such streak since 2007. For the year-to-date, housing starts have averaged 218,000, 15% above the pace seen last year, led by a 25% surge in multiple-unit construction.
he elevated level of building permits suggests that starts may maintain this momentum in the coming months; however, we continue to believe that the pace of home building activity will moderate towards the end of this year and into 2013 as the restraining effects from the changes to government-backed mortgage insurance rules that came into effect July 9 become more evident. As well, the recent cooling seen in the resale markets, especially in Vancouver and Toronto, will likely gradually spillover into the new home sector, supporting our view that starts activity will ease through over the medium-term as the housing market transitions to a more moderate and sustainable path.
