By Fergal Smith
TORONTO (Reuters) -Canadian housing starts fell more than expected in March, contributing to a slower trend in recent months that follows a rapid increase in borrowing costs, data from the national housing agency showed on Wednesday.
The seasonally adjusted annualized rate (SAAR) of housing starts fell 11% to 213,865 units from a revised 240,927 units in February, the Canadian Mortgage and Housing Corporation (CMHC) said. Economists had expected starts to fall to 237,800.
“The SAAR of housing starts and the trend appear to be returning to pre-pandemic levels,” Bob Dugan, CMHC’s chief economist, said in a statement.
“With interest rates remaining high, it continues to be challenging for developers and homebuilders to get projects started.”
The Bank of Canada has lifted its benchmark interest rate to a 15-year high of 4.50% to tackle inflation. It paused its tightening campaign in March after eight consecutive rate hikes.
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For the first quarter, starts averaged 223,000, the weakest quarter since the depth of the COVID-19 pandemic in early-2020, Robert Kavcic, a senior economist at BMO Capital Markets, said in a note.
The slowdown in residential construction could frustrate Canadian government plans to ease a supply shortfall and keep up with record population growth.
“We are still seeing a historically robust level of activity, but the downward turn is going to confound policymakers that have been pushing for a doubling of output,” Kavcic said.
(Reporting by Fergal Smith; Editing by Chizu Nomiyama and Andrea Ricci)