Wednesday, June 10, 2009

Housing starts rebound to top forecast in May

Canada's housing construction sector had a better-than-expected May as the seasonally adjusted, annualized rate of starts rose to 128,400 for the month.

That was ahead of the 126,000 annualized rate that economists had forecast.

In April, the seasonally adjusted annualized rate was 117,600.

"This morning’s housing starts data for May from CMHC provided us with the first sign that a bottom might be forming in Canadian homebuilding activity," said TD Bank economist Pascal Gauthier.

"Nation-wide homebuilding activity recorded its first broadly based increase since October 2008, both in terms of unit types (singles and multiples) and regions of the country," he said.

The federal government agency said urban single-home starts increased by 11.1 per cent to 46,900 units last month, while urban multiple-units starts, such as condominiums, rose by a similar percentage to 60,900.

May's seasonally adjusted annual rate of urban starts increased 22.0 per cent in Ontario, 16.8 per cent in the Prairies, 7.3 per cent in Atlantic Canada, and 3.3 per cent in Quebec. Urban starts declined 5.0 per cent in British Columbia.

Showing how much housing has retreated since last year, the overall seasonally adjusted, annualized rate of construction starts stood at 221,300 units in May 2008.

CMHC said housing starts are expected to improve throughout 2009 and over the next several years "to gradually become more closely aligned to demographic demand, which is currently estimated at about 175,000 units per year."

Gauthier said starts are expected to remain around 120,000 on average through the remainder of this year.

"The good news part [in that forecast] is that homebuilding activity would cease to be a drag on economic growth and employment heading into next year," he said.

"The bad news part, assuming our forecast unfolds, is that we do not expect the level of starts to head back above 150,000 units before 2011."