CANADA ECONOMICS: BMO On Housing Starts

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For Bank of Montreal, the Bottom Line is that Canadian homebuilding keeps on ticking, but there is not much here to overly concern policymakers yet.

It notes Finance Minister Flaherty said yesterday that he does not see bubble-like indicators in the Canadian housing market, but added that we have to be careful that we don't get an artificial increase in prices, a bubble, because of speculation. Note that last spring, before the 4th round of mortgage rule tightening was announced in June (and implemented in July), housing starts had flared as high as high as 253k units and averaged just over 230k units for all of 2012Q2.

Urban multi-unit starts inched up 0.9% in the month to 115k units, while singles dipped 1.7% to 62.5k. Multi-unit activity continues to bounce back from early-year lows (less than 80k in January), while singles grind along at steady and historically tame levels. Regionally, the bulk of the strength was in Ontario in October. Specifically, multifamily starts in Toronto rebounded after falling sharply in September. Through the first 9 months of the year, starts in Toronto have averaged 33k units annualized. Despite the skepticism, that is roughly in line, if not slightly below, the rate of household formation, and down from 48k in 2012 and 40k in 2011. Elsewhere, Calgary and Edmonton also saw starts pick up further, while activity in Vancouver, Saskatoon and Montreal fell.



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