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Canada: Housing starts increase 5.8% in January

Mon, Feb 8 2010, 19:01 GMT
by Economic and Strategy Team

National Bank of Canada  |  View company's profile

Annual rate
Latest : 186.3K (actual); 180.0K (forecast);
Previous 176.1K (revised from 174.5K)

FACTS: Canadian housing starts increased by 5.8% in January to 186.3K units from an upwardly revised 176.1K in December. Urban starts increased to 165.2K from 158.3K the previous month. Starts in rural areas also gained ground rising to 21.1K. Single family starts in urban areas rose 3.3% to 88.9K while multiple starts in urban areas advanced by 5.7% to 76.3K. On a regional basis, British Columbia (+4.1K) and Quebec (+3.3K) experienced the strongest gains while the Prairie region was subject to another monthly decline with starts down 1.5K to 29.7K in January.

OPINION: Housing starts experienced another very strong advance in January depicting the underlying strength present in the Canadian economy. The strong showing is consistent with other economic data including employment gains, the tightness in home resale markets, and the extremely accommodative low interest rate environment. Importantly strength is seen to be concentrated in areas like B.C. and Quebec, were inventory levels are not in oversupply. However, at this point we are beginning to see some yellow flags popping up depicting a possible deceleration in activity. December marked the first month since March 2009 were single family residential permits declined (-0.7% in volume), an area which has shown much strength since hitting its lows in February 2009. Data from some regional real estate boards suggest that existing home sales have decreased in January. In addition, the residential property market will soon be negatively impacted by rising interest rates, a development which may come as soon as the April Bank of Canada policy meeting. This said, today’s report was stronger than expected, and will have a positive impact on residential construction activity for Q1 2010. With just one month into the quarter, housing starts are up 14.8% (q/q, annualized rate). Nevertheless, we expect growth from housing starts to cool in the months ahead.

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Published on  Mon, Feb 8 2010, 19:04 GMT