New home construction rose 1.3% in April as Canada’s real estate market continued to show signs of recovery. Rising to a seasonally adjusted annualized rate of 201,700 units from a revised 199,200 in March, Canada Mortgage and Housing Corp figures showed on Monday.
Nevertheless, the April number came in below the average forecast of analysts, who had called for 205,000 starts. However, this was only the second time that the pace of housing starts has breached the 200,000 units barrier since November 2008. The Canadian dollar pulled back slightly after the data was released, but at C$1.0236 to the U.S. dollar, or 97.69 U.S. cents, it was still about 2% higher than Friday’s close, surging on the back of a European rescue deal.
In urban areas, housing starts rose 5.1% to 182,500, boosted by a 27.2% surge in new condo projects. Single home starts dropped almost 13% to 83,900 units. Most of the new building activity in the month was in British Colombia, where starts rose 16.4%. Ontario saw a 4.5% gain, while Quebec starts increased 1.1%. New projects dropped 3.3% in Atlantic Canada.
However, in the coming months, the pace of activity is expected to slow down as higher interest rates and home prices, and tighter mortgage rules bring down the demand. While still not back to pre-recession rates of about 225,000 per year, Canadian housing starts have rebounded above the estimated 175,000 rate of household formation, which could limit the upside over the next year.