Canadian housing starts unexpectedly rose in October, powered by demand for condominiums from first-time home buyers in the country's biggest cities.
Housing starts climbed 1.6% to a seasonally adjusted rate of 222,771 units in October, up from 219,293 units in the previous month, Canada Mortgage and Housing Corp. said Wednesday.
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Market expectations were for starts to come in at 211,000, according to economists at Royal Bank of Canada.
A 17% month-over-month decline in single-unit starts, hitting their lowest level since August of last year, was offset by a 12.5% increase in October from September in the construction of condominiums and apartments. Multifamily units made up about two-thirds of all starts in October.
"Canada's new home construction market remains strong," said Derek Holt, economist at Bank of Nova Scotia.
The results were driven by strength in Vancouver, British Columbia, as seasonally adjusted monthly starts hit a one-year high on demand for condominiums. Also, Montreal recorded the highest level ever of residential starts for the month of October. Offsetting increases there and elsewhere across the country was weakness in Toronto, as the city posted pronounced declines in single-detached home starts.
BMO Capital Markets said housing starts remain elevated as condominium builders are struggling to keep up with demand in urban centers because condos are "all most first-time buyers can afford," especially in places such as Vancouver, and the Toronto market. It noted that population growth in the 25-to-44 age group, or prime household formation years, is the strongest in over a quarter-century.
Real estate sales in Canada have tailed off after reaching a peak earlier this year, due in part to measures introduced by the province of Ontario to cool elevated house-price gains. That, however, hasn't weighed on housebuilding in Canada, with analysts saying 2017 is on track for the largest number of new units in a decade. The year-to-date average is 218,000 starts a month.
Canada Mortgage and Housing Corp. last month said slowing economic growth and rising mortgage rates will cause housing starts to drop by 2019, compared with this year. Nationally, the agency expects housing starts to range between 206,300 and 214,900 this year, but then fall to between 192,300 and 203,800 units by 2019.
Analysts say the elevated levels so far this year reflect healthy population growth. According to Statistics Canada, the country population expanded 1.2% on a year-over-year basis to 36.7 million as of the third quarter. Furthermore, there has been elevated levels of interprovincial migration within Canada starting in 2015, reflecting the commodity-price swoon that prompted workers to move from resource-rich regions of the country to other markets, most notably British Columbia and Ontario.
The country will look to bring a total 300,000 immigrants in 2017, and recently unveiled a pledge to raise annual immigration levels by more than 10% by the decade's end.
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(END) Dow Jones Newswires
November 08, 2017 11:09 ET (16:09 GMT)