Home Starts Jump Before Canada’s Tougher New Rules Take Hold

Canadian housing starts rose at the fastest pace in a year in September, with gains across most regions and categories in the last report before tougher federal mortgage rules to prevent a crash.

The annual pace of home starts was 220,617 on a seasonally adjusted basis, up 20 percent from August, Ottawa-based Canada Mortgage & Housing Corp. said Tuesday. The total was higher than all 15 estimates in a Bloomberg survey of economists that had a median of 190,000 units.

Housing gains have exceeded expectations for most of this decade, fed by low interest rates and the flow of people into cities such as Vancouver and Toronto. The boom has also brought record debt loads and taken prices out of reach for many first-time buyers. Finance Minister Bill Morneau last week announced new mortgage restrictions to curb the risks.

British Columbia’s average rate of starts over the last 12 months was the highest since the early 1990s, likely in response to surging Vancouver condo prices, according to Bank of Montreal senior economist Robert Kavcic.

The trend “could grow more worrisome in the year ahead given that the current pace of new construction, if sustained, would likely leave excess supply on the market,” he said in a research note.

Housing starts in September gained in every region of Canada except for Ontario, the CMHC report said. Quebec was the strongest with an increase of 33 percent led by rental apartments for seniors. The housing agency’s chief economist, Bob Dugan, said that type of gain “emphasizes the importance of inventory management.”

Single-family starts in urban areas climbed 15 percent to 64,045 and multiple-unit projects by 22 percent to 137,803.

(Updates with market context throughout. An earlier version of this story corrected prior month’s revised number in second paragraph.)

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