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Canada's Housing Starts Are Strong
Canada Mortgage and Housing Corp. (CMHC) reports that housing starts in Canada climbed a stronger-then-expected 10.9 per cent sparked by the combined impact of high demand and low mortgage rates.
For the month, starts in Canada rose to a seasonally adjusted annual rate of 199,800 from February's 180,100.
Economists had widely been expecting a solid number in the most recent report, although forecasts had called for the figure to hold steady at February's already healthy pace. Consensus forecasts had pegged starts for the month around the 177,000 mark.
In its monthly report CMHC said that urban single starts were up 3.4 per cent to an annual rate of 103,200 units in March, from 99,800 in February. Urban multiple unit starts ¨C which includes
condominiums, duplexes and apartment buildings ¨C soared 27 per cent to an annual rate of 76,600 in the most recent report, from February's 60,300.
Michel Laurence, chief economist at CMHC's market analysis centre, said, "the residential construction industry is responding to strong demand for new housing due to low mortgage rates and an improving economy. In fact, the new home market is taking its cue from the resale home market, which has been very active over the last several months. Faced with sellers' market conditions ¨C where buyers out-number sellers providing the latter with added leverage ¨C in the resale home market in many urban areas, buyers are diverting their attention toward the new home market".
New Homes In Canada Set Record
April 9, 2002
According to Statistics Canada's monthly building permits' report, January and February produced the highest monthly figures on record for permits issued for single-family dwellings.
The report said Canadian municipalities in February matched January's 12-year high, issuing $2.4 billion in housing permits.
"Low mortgage rates, high consumer confidence and scarcity of existing dwellings for rent or available on the resale market actually contributed to push potential buyers toward the new-home market", reports the agency.
It said, "just over 18,000 new dwelling units were authorized, the most since March 1990".
Peter Norman, housing economist at Clayton Research, said longer-term factors such as steadily increasing incomes, strong employment growth and reasonable housing prices played a bigger role than interest rate reductions. Norman added, "that is the housing market cake. Then you have the icing on the cake, which has been low interest rates".
He added that discussions with homebuilders have shown that construction activity is high across the country and analysts say 2002 starts should exceed the 163,000 starts of 2001.
However, February's non-residential permits fell by 10.8 per cent in February against January, hitting their lowest level in 21 months, in keeping with a downward trend that began at the start of last year.
Overall the total value of building permits issued by Canadian cities eased to $3.7 billion in February, a decline of 4.2 per cent against January's $3.8 billion, because of the drop in non-residential permits.
Norman said non-residential permits would bounce back as the economy gains strength throughout the year.
Statistics Canada said that on a year-to-date basis, the cumulative value of building permits to the end of February was up 5.6 per cent against the first two months of 2001.
Statscan's recent survey of public and private investment intentions said 2002 housing investment was expected to rise because of increases in new housing and renovations.
Raymond James Ltd. upgraded several Canadian timber companies, citing one of the reasons as being strong demand for lumber boosted by healthy housing start levels.
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