Thursday, October 9, 2008

Housing market

New home construction in Canada was nearly unchanged in September as a decline in single-family homes erased a jump in multiple dwelling units, and economists predicted the credit crunch would lead to a slowdown in ground-breaking.

Housing starts inched to a seasonally adjusted annualized rate of 217,600 units from an upwardly revised 217,400 units in August, Canada Mortgage and Housing Corp. said on Wednesday.

The September number beat the consensus expectation of analysts who had called for 203,000 starts. August starts were originally reported at 211,000 units.

While construction activity again stayed above the 200,000 unit mark, some analysts said this level would not likely be sustained in months to come.

"Because residential building permits tanked in August and the credit crunch reached a crescendo in September and into October, this could well be the last starts print north of 200K," Scotia Capital economists wrote in a report.

Canadian housing data has been in stark contrast with the state of the housing market in the United States, hit by a crisis that began in the subprime mortgage sector and spread across other parts of the market and the broader economy.

Economists generally expect the Canadian housing market to ease but not fall into crisis as it has in the United States, largely because risky mortgages are not a large part of the market. Even so, the Canadian economy is also expected to slow, which would likely soften demand for housing.

"This slowdown, however, is expected to be both measured and orderly, and in no way do we expect the extent of the correction to be comparable to that currently taking place in the U.S.," said TD Securities strategist Millan Mulraine.

Gains were reported across the country, except in Ontario and Quebec. British Columbia and the Atlantic provinces both reported 10 percent gains, followed by the Prairies.

Urban single home starts declined 8.1 percent to 70,000 units from 76,200, while urban multiple starts rose 5.5 percent to an annual rate of 122,500 units from 116,100 in August.

Rural starts were estimated at an unchanged seasonally adjusted annual rate of 25,100 units in September.

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