Canadian housing starts unexpectedly increased for a second month in March and building permits rose in February, evidence that low borrowing costs are supporting construction.
Starts were 184,028 at a seasonally adjusted annual pace during the month, up from a revised 183,207 in February, the Ottawa-based Canada Mortgage & Housing Corp. said on its website today. In a separate report, Statistics Canada said building permits rose for a second month in February on a rebound in non- residential projects.
Construction has been supported by some of the lowest mortgage rates in decades, along with historically cheap borrowing for businesses, even as the government tries to tighten the mortgage market amid concern prices in some cities have become inflated. Even with the pick-up over the past two months, starts in the first quarter were down 12.5 percent on average from the fourth quarter.
“An ongoing low rate environment is preventing a more protracted weakness in residential construction,” Emanuella Enenajor, an economist with CIBC World Markets, said in a note to investors. “Buyer fatigue and underlying household restraint” are still constraining residential construction, she said.
While growth in the construction industry shrank 0.1 percent in January from the previous month, it accelerated 3.5 percent from the same month a year earlier, making it the fastest growing sector on a year-over-year basis, according to output figures released by Statistics Canada on March 28.
Housing will curb the nation’s growth rate by 0.1 percentage point this year, the Bank of Canada estimates.
Finance Minister Jim Flaherty tightened mortgage rules for the fourth time in four years in July, and has criticized lenders for lower mortgage rates in recent weeks.
Home starts have increased since January’s reading of 163,945 units, which was the lowest since 2009. Economists forecast 175,000 starts in March, according to the median of 19 responses to a Bloomberg News survey.
The value of municipal permits rose 1.7 percent to C$5.95 billion ($5.86 billion) in February, Statistics Canada said. Economists forecast a 3 percent gain according to the median of nine responses to a Bloomberg survey. The total value of permits in February was 8.5 percent lower than the same month a year earlier, Statistics Canada said.
Permits for non-residential construction rose 18.9 percent to C$2.37 billion in February, with the first gain in four months leaving the total less than the recent peak of C$3.64 billion in October. Residential permits fell 7.2 percent to C$3.58 billion.
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