Housing starts show surprising strength

The momentum in Canada's new housing sector still isn't showing any sign of fading, as figures showed another surprisingly strong month for housing starts in March.

The annualized rate of housing starts was 254,700 units, adjusted for seasonal variations. That'sdown slightly from 255,600 units in February, Canada Mortgage and Housing Corp. said Tuesday.

March's figure easily topped the expectations of economists, who had been forecasting housing starts to come in at 229,000.

Starts of single homes in urban areas hit an annualized rate of 80,500 last month,a decline from82,900 in February, while starts of multiple-unit buildings, such as condominiums, rose to 141,000 from 139,500.

"The high level of starts posted in February continued in March, thanks to the multiple segment and particularly condominium starts, which registered a significant rise in Alberta," said Bob Dugan, chief economist at CMHC's market analysis centre.

"Nevertheless, the single-detached component, which is usually a strong trend indicator,decreased slightly. This is consistent with our view that the housing market will moderate gradually throughout 2008," Dugan said.

The annual rate of urban starts slipped 2.3 per cent in Ontario, 16.8 per cent in Quebec and 37.1 per cent in British Columbia. Urban starts grew by 75 per cent in Atlantic Canada and 52.5 per cent in the Prairie region.

"Residential construction in Canada isnt letting up despite widespread expectations to the contrary," said Robert Hogue of BMO Nesbitt Burns.

"Still, one can reasonably wonder just how long housing construction can be sustained at such high levels in the face of deteriorating affordability and growing economic uncertainty, and as home resales show signs of cooling in many parts of the country," Hogue said in a commentary.

TD economist Dina Cover agreed that the housing sector is likely in for some cooling later this year.

"The Canadian economy, and the construction sector in particular, will not be immune from the headwinds blowing up across the border," she wrote.