The "fever" in the resale home market has spread to those who build new homes, with new starts outpacing expectations in December.
Economists had expected new housing starts to rise to 160,000 units in the month, but they surged to 174,500 units - a gain of 5.9 per cent.
The resale market has seen prices surge as a shortage of listings, low interest rates and pent-up demand, but the new home market has been slower to rebound as consumers opted for older homes.
"It is increasingly looking like the fever in the existing home sales market is starting to catch in the new residential housing market," said Ian Pollick, an economist at TD Securities. "We expect the recent pick-up in housing demand to gain further traction, which will likely provide a further boost to new residential building activity."
The Canada Mortgage and Housing Corp. said both single and multiple starts increased.
The seasonally adjusted annual rate of urban starts increased 6.6 per cent to 157,100 units in December, while urban multiple starts (condos, for the most part) increased to 77,700 units from 72,800.
"The improvement in housing starts was broad-based in December," said Bob Dugan, CMHC chief economist. "Solid increases occurred in both single and multiple starts to end the year."
In separate data released Monday, Statistics Canada said contractors took out $5.9-billion in building permits in November, a decrease of 4.6 per cent from October as non-residential plans eased off. However, the value of permits was 23.1 per cent higher than last November, and 62.8 per cent higher than February's trough.
The residential sector continued to show strength, however, with permits reaching prerecession levels with a 9.1-per-cent gain to $3.8-billion. It was the fourth consecutive month of increases.
"The pull-back seen in permits strikes us to be an unwind from unsustainably strong gains due to one-off factors," Mr. Pollick said