The combination of record-low interest rates and torrid consumer demand means Canadian home builders are breaking ground at the fastest pace in almost a year.
Housing starts hit an 11-month high in November, led by single-home construction, Canada Mortgage and Housing Corp. said yesterday. Starts have risen in three of the last four months, and are now 34 per cent above April's lows.
While they haven't fully bounced back to prerecession levels, the building trend is clear.
"[Housing starts]were one of the first that saw a downturn, and one of the first to see a recovery," said Toronto-Dominion Bank economist Pascal Gauthier.
Starts rose 0.7 per cent to an annual 158,500 units on a seasonally adjusted basis last month, CMHC said, a far cry from April, when they dropped to the 118,500 mark.
Many economists, including CMHC itself, see activity picking up further next year.
As a general guideline, Canadian housing starts should climb at about 175,000 units to keep pace with population growth.
That doesn't mean the path to recovery will be smooth, however.
Borrowing costs are likely to rise in the second half of 2010, and pent-up demand, which has been spurring activity, will taper off, causing the pace to "fizzle" in the second half, Mr. Gauthier said.
Peter Norman, senior director of economic consulting at Altus Group, agrees.
"I see a strong first half, then tailing off," he said. "A lot of what we've been seeing [in demand]is first-time buyers, and I think we'll see a big falloff there."
Yesterday's housing-starts data came a day after Statistics Canada reported that building permits had jumped 18 per cent in October, hitting a 13-month high.
Single-family homes and industrial building plans led the increases.
Starts for single-family dwellings rose 3.4 per cent, to 69,800 units, in November, while multi-unit starts eased by 1.7 per cent, CMHC said.
The annual rate of urban starts has risen the most in Quebec, at 10 per cent, followed by Atlantic Canada.
Residential investment will account for a growing piece of Canada's economy, Mr. Gauthier at TD said.
Such investments - which include home renovations - will reach 6 per cent of gross domestic product next year, up from the current level of about 5.7 per cent.
Tavia Grant