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Housing starts climbed unexpectedly in June as multiple urban starts in Quebec and British Columbia bounced higher, but homebuilding is still expected to slow as the year progresses, Canada Mortgage and Housing Corp said on Tuesday.
The seasonally adjusted annualized rate of housing starts surged to 222,700 units in June, compared with an upwardly revised rate of 217,400 units in May. The May figure was revised up from 211,400 units.
The bounce bucked expectations for a slowing in housing construction. The number of starts in June was above the forecasts of analysts in a Reuters poll, who had expected 205,000 starts.
"We thought the data would be above consensus given a clear strengthening in the latest building permits reading, and today's starts print confirmed that homebuilding is showing no signs of cooling off yet," CIBC World Markets economist Emanuella Enenajor said in a research note.
"Today's data suggest homebuilding could be a contributor to growth in the second quarter, and the current low rate environment is continuing to support already elevated housing construction activity, namely in the condo/multi-family segment," she added.
Canada's hot housing market has sparked fears of a bubble, particularly in Toronto, where low interest rates have driven a condominium building boom and double-digit annual price increases in existing home sales.
The government moved last month to tighten conditions for both homebuyers and mortgage lenders in a bid to deflate a possible bubble before it pops, mindful of the U.S. housing boom that was left unchecked until it burst.
Housing starts, a volatile data set, were driven by a surge in multiple urban starts in two provinces -- Quebec and British Columbia -- but the level remains close to the six-month average, according to the CMHC.
"CMHC still expects the pace of housing starts to moderate as the year progresses," Mathieu Laberge, deputy chief economist at CMHC's Market Analysis Centre, said in a statement.
For some markets, CMHC uses a moving average to complement the monthly rate to account for considerable swings in monthly estimates. It said housing starts were trending at 218,500 units in June.
The seasonally adjusted annual rate of urban starts increased 2.6 percent to 199,500 units in June. Urban single starts slipped 0.3 percent to 67,500 units, while multiple urban starts jumped 4.1 percent to 132,000 units.
June's seasonally adjusted annual rate of urban starts increased 7.7 percent in Atlantic Canada, 17.3 percent in Québec and 31.2 percent in British Columbia. Urban starts fell 6.9 percent in the Prairies and by 9 percent in Ontario.