Canada Housing Starts Beat Expectations

09 May 2012 05:00am - Florence Fullalove

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Canada Housing Starts Beat Expectations

The Canada Mortgage and Housing Corp have reported that housing starts increased more than expected in April. The seasonally adjusted annual rate of housing starts was 244,900 units last month, up from 214,800 in March. This result was thanks to an increase in condos and apartments, beating predictions by more than 40,000 units and was the highest figure since February 2008, before the recession. Starts on multiple units, including condominiums and apartments, climbed a sharp 27.4% to 158,500, the second highest monthly reading on record. However, this has fuelled concerns that an oversupply of properties, especially condominiums in bigger cities, could lead to a housing bubble. Overall starts have now increased in seven of the past eight months, playing into concerns that the condo market is headed for serious correction as developers continue to build.

Robert Kavcic, an economist at BMO Capital Markets said, “We’re now clearly building a lot more than underlying demand warrants in Canada.” He added, “Since the end of the recession, the gap has really exploded in favour of condos over single-family homes,” with the condo boom concentrated in Toronto, Vancouver and Montreal. Kavcic said the glut of condominiums could lead to soft prices and weak construction activity down the road.

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Related Links:
• CMHC
April 2012 Housing Starts
• BMO Capital Markets
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