Housing starts hit their highest level this year in November, more proof that Canada's real estate market has clawed out of recession.
Starts rose 0.7 per cent to 158,500 units on a seasonally adjusted basis, as single-home construction outweighed a drop in multiple home activity, Canada Mortgage and Housing Corp. said Tuesday.
Record low interest rates are fuelling a rebound in Canada's real estate market, spurring rising prices and a flurry of buying activity. The Bank of Canada today reiterated its expectation that rates will stay low until the middle of next year.
“The piping-hot Canadian housing market should continue to drive improved residential construction activity,” said Bank of Montreal economist Robert Kavcic. “The Canadian construction industry is looking like source of strength in the coming year.”
Residential investment will account for a growing portion of Canada's economy, said Toronto-Dominion Bank economist Pascal Gauthier. He expects such investments – which include home renovations – will reach 6 per cent of GDP next year, up from its current level of about 5.7 per cent.
More builders have plans in the works, a report showed yesterday. Building permits jumped 18 per cent in October to the highest value in 13 months, Statistics Canada said yesterday.
The housing starts results were slightly less than the 160,000 starts economists had expected. Still, they're running at a much stronger level than in April, when they sunk to the 118,500 mark.
“The improvement in housing starts continued in November,” said Bob Dugan, CMHC's chief economist. “Overall starts numbers were up due to a solid increase in singles starts.”
Multiple starts eased 1.7 per cent in November, CMHC said, to 71,300 units. Single starts rose 3.4 per cent to 69,800 units.
The annual rate of urban starts has risen the most in Quebec, at 10 per cent, followed by Atlantic Canada.
Housing starts will average at about 164,900 next year, while typical prices will rise to $324,500 from $312,950 this year, CMHC said in a forecast last month. TD, too, thinks starts and prices will accelerate next year.
“In the months ahead, we expect to see a sustained improvement in home-building activity,” Mr. Gauthier said. Lower costs for raw materials and labour should also boost the industry, he added.
National levels are still well below those of previous years, when they surpassed the 200,000 mark. Economists have said starts should run at about 175,000 units to keep pace with population growth.
