OTTAWA – Canadian housing starts rose in August, hitting the second-highest one-month level this year, with no signs of an immediate slowdown as population growth and robust economic activity fuel demand.
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Starts rose 0.6% to a seasonally adjusted annual rate of 223,232 units in August, Canada Mortgage and Housing Corp. said Monday. The result beat market expectations for housing starts to hit 215,000 in August, according to economists at Royal Bank of Canada.
August marked the eighth straight month Canadian housing starts exceeded the 200,000 level, at a time when the Canadian economy is growing at a pace leading the Group of Seven countries. The six-month moving average is nearing the 220,000 mark, or the fastest pace since late 2012.
The housing agency said demand for new homes remains strong, consistent with consumer confidence which reached its highest level in 10 years. Housing starts are climbing even though authorities in Ontario, Canada's biggest province, introduced in the spring to slow down the surge in real-estate prices, which have weighed on sales activity in Toronto and its surrounding communities.
"Canada's homebuilding sector continued to defy the trend in resales," said Josh Nye, economist at Royal Bank of Canada.
Analysts say the elevated levels shouldn't trigger worries about overbuilding in the Canadian market. Instead, it reflects healthy population growth, which Canadian census results this year indicated is tops among the G-7. As of the second quarter, Canada's population expanded 1.2% on a year-over-year basis. The country, with a population of 36.6 million, set a target of bringing in 300,000 immigrants in 2017, matching the previous year's total.
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There's been a shift in migration within Canada, as workers left resource-rich regions of the country amid the commodity-price swoon to relocate elsewhere, most notably the Pacific Coast province of British Columbia and Ontario. Millennials are also seeking bigger houses as they start a family.
"We expect Canadian housing starts to remain relatively healthy in the coming months, but begin to trend lower as the effects of rising interest rates...gradually take a bite out of demand," said Michael Dolega, economist at TD Bank. The Bank of Canada lifted its benchmark interest rate last week for the second time this year, and now sits at 1%.
CMHC's August report said urban housing starts rose 0.8% to 207,524 units. Multiunit urban starts, which includes condominiums, increased 2.7% to 145,618 units, while single-detached starts in urban centers fell 3.2% to 61,906.
Rural starts were estimated at a seasonally adjusted annual rate of 15,708 units.
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(END) Dow Jones Newswires
September 11, 2017 11:03 ET (15:03 GMT)