The annual pace of housing starts increased more than expected in March and hit its highest level since September 2007.
The Canada Mortgage and Housing Corp. says the seasonally adjusted annual rate of housing starts for March came in at 253,720 units, up from 214,253 in February.
Economists had expected a reading of 215,000 for last month, according to Thomson Reuters.
The overall increase came as the annual pace of urban starts increased by 20.2% to 235,674 units, boosted by an increase in multi-unit starts.
Multi-unit urban starts increased by 30.2% to 160,989, while single-detached urban starts increased by 3.1% to 74,685 units.
“We had noted that a decent build up of unused permits suggested strong upcoming readings,” says Nick Exarhos, director at CIBC World Markets, in an industry note, “and March saw the benefits.”
“The strength was particularly pronounced in Toronto and Vancouver,” notes Michael Dolega, senior economist at TD Bank, in an industry note. New supply is particularly welcome in Toronto, where a lack of inventory has helped fuel rising home prices.
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“The completion of these units should help take some steam out of Toronto’s home price growth,” says Dolega, “although this won’t happen overnight and is likely a story for next year and beyond.”
Exarhos says a strong building start in 2017 sets the stage for continued momentum in residential investment, which CIBC hadn’t originally counted on when making its annual forecast.
Dolega, however, says housing starts are likely to slow as the effects of a warm winter manifest in a slower building pace during spring and summer.
Still, the strong showing in housing starts is yet another strong economic indicator ahead of Wednesday’s monetary policy report from the Bank of Canada. “But don’t expect Governor Poloz to change his dovish script — at least not yet,” says Exarhos.
Read: Economists differ on timing of potential 2018 rate hikes