January housing starts rise

Canada is on track to start building 170,400 units of housing this year, about 10 per cent less than in 2010, according to figures released Tuesday.

Canada Mortgage and Housing Corp. estimated that number of actual housing starts in January, without seasonal adjustments, was 10,584.

That's down from January 2010, when there were 11,172 actual starts.

The Canadian housing market was unusually active in late 2009 and early 2010 due to a number of factors, including catch-up from the recessionary levels in late 2008 and early 2009, preparations for the 2010 Winter Olympics and historically low interest rates that kept the cost of borrowing low.

The Bank of Canada began raising its key interest rate last summer, after keeping it at the lowest possible 0.25 per cent for more than a year in an effort to stimulate economic activity.

The central bank's key rate has risen to one per cent still below the historical norm but has been stable since October. Many economists, however, expect that it's inevitable that the central bank will start to tighten credit conditions further this year.

"We continue to expect a softening in housing starts in coming months as home prices moderate and the Bank of Canada resumes its tightening cycle by mid-year," commented Krishen Rangasamy, an economist at CIBC World Markets.

On a seasonally adjusted annual rate, the January starts translate into an estimated 170,400 units of single-family and multiple-family dwellings, such as condominiums and apartment buildings.

January's seasonally adjusted rate was up from 169,000 in December, CMHC said.

The federal agency says the higher seasonally adjusted rate was due to an increase in rural areas of the country. The rate of urban starts, on the other hand, fell 1.7 per cent to 146,900 units the bulk of the country's new home starts.

"Single-detached and multiple starts showed a moderate decline," said CMHC economist Bob Dugan.

On a regional basis, Ontario and Atlantic Canada showed increases in their urban seasonally adjusted rates while there were declines in Quebec, the Prairies and British Columbia.