Canada Housing Starts Drop, Mortgage Sector to Slow
Canadian housing starts fell a greater than expected 9.2 percent in October, hitting their lowest level in more than a year, data indicated on Monday,
New home construction fell to a seasonally adjusted annual rate of 167,900 units from a downwardly revised 185,000 units in September, Canada Mortgage and Housing Corp said on Monday.
The number missed analyst forecasts for 183,000 starts. September starts were previously reported at 186,400 units on an annualized basis.
It was the fifth monthly decline in the six months since new home construction came close to a two-year high in April, and the lowest level of starts since September 2009.
“Canadian housing demand has cooled significantly this year, and supply now appears to be following,” said Robert Kavcic, economist at BMO Capital Markets.
Once a major source of economic growth for much of the past decade, the Canadian housing sector has begun to slow after the recession, as expected, with recent data showing that home sales have cooled, construction has moderated and prices are showing signs of stabilizing.
The heated activity in all corners of the housing market was a major reason that residential mortgage credit expanded rapidly to top C$1 trillion as of August 2010, a separate report showed on Monday.
The gain marked a 7.6 percent rise from the year before, the Canadian Association of Accredited Mortgage Professionals (CAAMP) said of its annual mortgage survey. Data was collected from various sources, including an online survey of 2,005 Canadians. More than one-half of the sample were home owners with mortgages.
CAAMP described the growth rate in the past year as “quite strong” and said coming years should show a slower, but historically solid, growth rate as well, even with buying activity and housing construction slowing.
It estimated the amount of outstanding residential mortgage credit will rise by about 7 percent this year to C$1.028 trillion, with growth easing to a 6.5 percent pace in 2011, and close to 6 percent in 2012. That compares to average growth rates of 10.7 percent a year between 2004 and 2008, when the housing market was booming.
The report also showed Canadian homeowners are comfortable with their mortgage debt and believe they can handle an increase in interest rates.
Starts of closely watched urban single-family homes declined 8 percent in October to 57,700 units, while urban multiples, such as condos, fell 15 percent to 84,700 units.
CMHC said the moderation in monthly housing starts from “relatively high” levels earlier in the year was consistent with its projection of 184,900 units this year. It estimates about 175,000 units next year.
Regionally, starts were lower by a province-leading 24.5 percent in Ontario, followed by a 16.9 percent drop in the Prairie region. Starts in British Columbia fell 9.1 percent and were down 2.6 percent in Quebec. Atlantic Canada was the only region to report an increase in new home construction in the month, up 32.9 percent.
Rural starts were estimated at a seasonally adjusted annual rate of 25,500 units in October.