Multiple-unit building declines

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Canadian housing starts eased 1.5 per cent in March, the first decline this year, as builders broke ground on fewer multiple-unit dwellings such as condos.

Housing starts fell to 197,300 units, on a seasonally adjusted annual basis, Canada Mortgage and Housing Corp said Monday. Economists polled by Bloomberg had pegged starts at 205,000 units in the month.

Urban multiple starts fell 15.2 per cent while single-family starts grew 6.9 per cent.

"The chunky nature of the typical condo project tends to suggest that the picture could swing around fairly significantly," said Stewart Hall, economist at HSBC Securities (Canada), adding that there may be some "project saturation in [Ontario's]multi-dwelling component."

The findings echo a report last week, showing building permits eased due to a lull in multiple-unit activity. Building permits fell for the second month in a row in February, sliding 0.5 per cent to $5.7-billion in the month.

"The moderation in March housing starts was due to a decrease in the volatile multiple starts segment," said Bob Dugan, chief economist at CMHC's market analysis centre. "Helping to offset this was an increase in singles starts as well as more activity in rural areas."

Single starts are now running at a four-year high, according to the Bank of Montreal.

"Activity in this sector is now up 126 per cent from the recession low and, impressively, has seen 11 consecutive monthly gains since bottoming in April last year," said BMO economist Robert Kavcic.

Starts fell 16.3 per cent in British Columbia, 15.5 per cent in Ontario, and 8 per cent in Atlantic Canada. They rose 13.5 per cent in Quebec and 7.3 per cent in the Prairies.

Rural starts were estimated at 22,100 units in March.

Starts have been broadly rising in recent months as Canada's real-estate market picks up steam. Levels in January and February were revised upwards. In January, they rose 7.5 per cent to 189,000, and in February, the new reading shows they rose 6 per cent to 200,400 units. That marks the first time since October, 2008 they've been above the 200,000 mark, according to BMO.

Indeed, housing was one of the first parts of the economy to bounce back last year, even as unemployment remained high and the overall activity muted.

"A rather uncharacteristic set of circumstances that came about courtesy of both the pull of historically low interest rates and the push of a number of federally sponsored funding conduits that encouraged the banking sector to lend out in the mortgage category," Mr. Hall said. "A rather artificial set of circumstances that are in the process of being wound up."

Many economists expect the real-estate market will cool later this year.

The Bank of Canada is expected to start boosting its key lending rate this summer, if not earlier, after slashing interest rates to a record low. It will make its next rate announcement on April 20.

CMHC is Canada's national housing agency.