Housing starts, home buying intentions rise

Housing starts, home buying intentions rise

By Ka Yan Ng

TORONTO (Reuters) – Canadian housing starts rose a better than expected 6.1 percent in February, reinforcing views that the residential housing sector is a major force pulling the economy out of recession.

Starts on new homes rose to a seasonally adjusted annualized rate of 196,700 units in February from a downwardly revised 185,400 units in January, Canada Mortgage and Housing Corp said on Monday.

The number of starts in February surpassed the average forecast of analysts for 190,000. The January figure was a slight downward revision from the previously reported 186,300 units.

“Overall, with the better than expected gain in residential construction activity in Canada, it appears that the new homes market is slowly coming back to life and may finally be benefiting from the resurgence in overall housing market activity,” said Ian Pollick, economics strategist at TD Securities.

The Canadian dollar rose to a six-week high of C$1.0257 to the U.S. dollar, or 97.49 U.S. cents, following the housing data.

It currency pared gains as details showed most of the strength was due to a 19.1 percent surge in the volatile multi-dwelling group.

That group, which includes high-rise condos, soared to 89,900 units in the month. The closely watched single-family home component showed starts increased by a muted 0.5 percent to 89,200 units. Still, single-family housing starts have advanced for 10 straight months.

The mounting activity was in line with a strong rebound in sales and prices in the broader housing market, spurred by consumer confidence and low interest rates, after the market hit bottom during the global financial crisis.

Analysts expect the market has the legs to advance further this spring before the arrival of new mortgage rules in April and changes to provincial sales tax regimes in British Columbia and Ontario in July cool things down a bit.

“Housing starts continue to chase surging home sales, which appear to have a green light through the spring,” said Robert Kavcic, an economist at BMO Capital Markets. Along with the tax and mortgage rule changes to come, he said he expected interest rate hikes should temper demand.

Meantime, Canadian home-buying intentions for the next two years has risen to 10 percent from 7 percent two years ago, according to a home ownership survey by Royal Bank of Canada RY.TO>.

Six in 10 Canadians also believe home prices will increase this year, up from 25 percent in 2009, the survey found. Similarly, 64 percent think mortgage rates will be higher over the next year, up from 33 per cent a year ago.

The RBC study also found that 91 percent of homeowners believe a home is a good investment, the highest level in 12 years, while 26 percent expect their home to be their primary source of income when they retire.

Regionally, CMHC said Ontario led February’s gain in housing starts, jumping 28.6 percent from January, followed by a 14.3 percent advance in the Atlantic provinces. The Prairies rose 10.8 percent, while British Columbia was up 8 percent. Only Quebec saw a decline, with a 14.1 percent fall.

Rural starts were estimated at a seasonally adjusted annual rate of 17,600 units in February.

(Reporting by Ka Yan Ng; editing by Rob Wilson)