Housing starts accelerate to 196,700 units, topping expectations, while poll says home-buying intentions are also on the rise

Tavia Grant – Globe and Mail

Housing activity picked up speed last month, topping expectations as builders broke ground on condominiums and other multiple-unit dwellings.

Starts rose to 196,700 units in February, on a seasonally adjusted annual rate, from 185,400 units in January, Canada Mortgage and Housing Corp. reported Monday.

Home building has revved back to life after the recession caused housing starts to fall below 120,000 last spring. Low borrowing costs and a rush to beat a provincial sales tax in some provinces are spurring demand – and builders are responding accordingly.

“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. “Housing still remains a bright spot in Canadian economic activity.”

The pace of advance, however, may not continue in the latter half of this year as interest rates rise and demand tapers off, he cautioned.

February’s gain in housing starts was concentrated in the multiple starts segment, particularly in Toronto, said Bob Dugan, chief economist at CMHC’s market analysis centre. Multiple units include condos, town houses and duplexes. CMHC doesn’t break down which aspect of multiple construction is rising fastest.

Urban multiple starts, which tend to be more volatile, jumped 19.1 per cent while single urban starts rose 0.5 per cent.

Ontario led the country’s starts, with a 28.6-per-cent increase. They rose 14.3 per cent in Atlantic Canada, 10.8 per cent in the Prairie region and 8.0 per cent in British Columbia. In Quebec, they fell 14.1 per cent.

Economists polled by Bloomberg had expected 190,000 starts in the month.

Home-buying intentions remain strong, according to a poll by the Royal Bank of Canada released Monday. The portion of Canadians who are very likely to purchase a home in the next two years has risen to 10 per cent from 7 per cent two years ago, according to RBC’s home ownership study. Younger Canadians – aged 18 to 24 – will lead demand this year, with those very likely to buy almost doubling to 15 per cent from 8 per cent in 2009, it said.

Most Canadians also believe house prices will rise this year. Six in 10 think prices will go higher, up from 25 per cent in 2009. And nearly two-thirds, or 64 per cent, believe mortgage rates will be higher over the next year, up from 33 per cent in the last survey.

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