Housing starts advance in May

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Globe and Mail Update
Last updated Wednesday, Jun. 08, 2011 8:44AM EDT

Construction activity picked up slightly in May, boosted by multiple dwellings such as condos, Canada Mortgage and Housing Corp. said today.

Housing starts rose to a seasonally adjusted annual rate of 183,600 from 178,700 in April, the federal agency reported.

“Housing starts increased modestly in May due to an increase in multiple construction in most provinces and in rural starts,” said Bob Dugan, chief economist at CMHC’s Market Analysis Centre. “The increase in multiples and rural starts was partly offset by a decrease in single starts.”

The numbers were juiced by a 33.3-per-cent increase in British Columbia and, to a lesser extent, a 13.5-per-cent gain in Quebec. Starts increased 11 per cent in the eastern provinces and 10 per cent on the Prairies. Ontario starts fell 22.9 per cent.

“Note that housing starts and building permits reached a cycle peak of around 200,000 back in Q1 of last year and since then the trend has been a slowly declining one, despite a low interest rate environment,” said economist Krishen Rangasamy of CIBC World Markets.

“And with a recent softening in the pace of existing home sales, the listing to sales ratio rose to a 7-month high in April. So, we may see some softness ahead for housing. We expect housing starts to continue to soften (i.e. a 10 per cent or so drop in starts compared to last year) as home prices stagnate in light of higher interest rates in the second half of the year.”