Canada hit by ‘housing chill’

Canadian housing starts sank to the lowest level in almost six years in December, while developers struggled to break ground during an abnormally snowy month...

Housing starts hit an annualized rate of 187,500 units, down from 233,300 in November. Still, despite the December hit, starts finished the year up 1 per cent from 2006 at 229,600, and just shy of the record set in 2004, according to figures released yesterday by the Canada Mortgage and Housing Corp.

"With weather exerting a negative influence on building activity in December, the sharp drop in housing starts shouldn't be seen as a prelude to a U.S.-style meltdown," said BMO Nesbitt Burns economist Robert Hogue. Nonetheless, the sector's strong momentum of the last several years is expected to slow moderately, as rising economic uncertainty throws some sand in the housing engine."

The CMHC expects starts to decline to 214,300 units this year, while the Royal Bank of Canada forecast 210,000 starts. "The strong price gains recorded in 2007 began to stress affordability, suggesting that Canada's housing market will cool," said senior bank economist Dawn Desjardins. "Still, against a backdrop of a strong labour market, rising wages and low interest rates, the slowing is likely to be modest."