By Greg Quinn – Bloomberg

Canadian housing starts increased to the highest level in 14 months in December because of increased single and multiple-family homes, Canada Mortgage and Housing Corp. said.

Starts rose to a seasonally adjusted annual pace of 174,500 last month compared with 164,800 units in November, the third monthly gain, the Ottawa-based housing agency said today. Economists had forecast a 160,300-unit pace, according to the median of 18 responses in a Bloomberg survey.

Cheaper borrowing costs have sparked growing demand for Canadian homes, helping the country’s economy recover from its first recession in 17 years. The Bank of Canada has pledged to leave its benchmark rate at a record low of 0.25% through June unless the inflation outlook shifts.

“New home construction is going vertical and will be a sharp positive contribution to fourth-quarter real gross domestic product,” Derek Holt, economist at Scotia Capital in Toronto, said in an e-mailed note to clients.

Work on urban single-family homes rose 6.4% to 79,400 units in December, while multiple-dwelling starts rose 6.7% to 77,700 units from 72,800 units in November, the housing agency said.

Building Permits

In a separate report today, Statistics Canada said building permits fell 4.6% in November led by non-residential projects, particularly in Toronto and Calgary, while housing permits continued to grow.

The total value of permits issued by municipalities fell to $5.94 billion ($5.78 billion), Statistics Canada said in Ottawa. Permits for non-residential construction dropped 22% to $2.14 billion, and residential permits rose 9.1% to $3.79 billion, the fourth straight gain.

The decline follows a revised 20% increase in October to a 13-month high, as builders took advantage of the lowest mortgage rates in half a century. Bank of Canada Governor Mark Carney has said consumers should be cautious about taking on too much debt, and the bank’s adviser David Wolf is scheduled to give a speech at about 2 p.m. New York time on housing and the recovery.

Stimulus

“No other sector of the economy has been as highly affected by economic stimulus as housing,” said Phil Soper, president of Brookfield Real Estate Services Fund, in a Jan. 7 report.

The Bank of Canada cut its key lending rate to a record low 0.25% in April and Prime Minister Stephen Harper has offered temporary tax credits for home renovations.

Home construction has responded to the stimulus, with permits growing 38% over the 12 months ending in November. Non-residential permits have increased just 3.4% in that time.

Single-family home permits rose for a ninth month, by 2.9% to $2.5 billion, Statistics Canada said. Multiple- family permits rose 23% to $1.3 billion.

In November, permits for industrial projects plunged 58% and institutional permits dropped 26%, while commercial permits rose 3.9%.

By city, permits in Toronto fell 8.9% to $963 million, and dropped 47% in Calgary to $312 million. Vancouver had one of the biggest urban gains, with permits jumping 40% to $484 million.

Economists predicted a 3.3% drop in building permits based on the median of 12 estimates taken by Bloomberg News.

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Contact Laurin Jeffrey for more information  –  416-388-1960

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