Housing starts unexpectedly fall

Housing starts unexpectedly eased last month as builders broke ground on fewer single and multiunit dwellings, the latest sign of cooling in the market.

The seasonally adjusted annual rate of housing starts ebbed to 189,100 units in May from a revised 201,800 units in April, Canada Mortgage and Housing Corp. said Tuesday.

The report comes amid signs the country's resale market is slowing. Most economists expect house prices will fall next year, after a blistering first-quarter for Canada's real-estate market, as interest rates rise and demand ebbs. CMHC itself believes the pace of housing starts will ease later this year.

"Housing starts decreased in both the singles and the multiples segments in May," said Bob Dugan, chief economist at CMHC's market analysis centre. "The decrease in housing starts in May is consistent with our forecast that housing starts for 2010 will reach 182,000 units."

Economists polled by Bloomberg had expected the pace of housing starts would be 202,000 units in May.

Canada's housing market has been booming in recent months as buyers rushed into the market to beat the introduction of a new sales tax in Ontario and British Columbia, and ahead of expected rate hikes, which began last week. However, "the May [housing starts]numbers may suggest that the support from these factors is starting to wane," said Paul Ferley, assistant chief economist at the Royal Bank of Canada.

Urban multiple starts fell 5.6 per cent, while single urban starts tumbled 14.1 per cent.

The biggest drop was in the Prairies, where urban starts shed 21.8 per cent, followed by a 13-per-cent drop in Quebec, a 12.9-per-cent fall in British Columbia, and a 2.7-per-cent decline in Ontario. Urban starts increased 23.3 per cent in Atlantic Canada.