The annual rate of housing starts declined by 3% in August, Canada Mortgage and Housing Corporation reported on Thursday.

The seasonally adjusted annual rate of housing starts was 183,300 units in August, down from a revised figure of 188,900 units in the month of July.

The drop represents the fourth consecutive monthly decline, putting housing starts 10.9% below their spring high, according to economists at BMO Capital Markets.

“Housing starts moved lower in August, reflecting a decrease in both single and multiple starts,” said Bob Dugan, chief economist at CMHC’s Market Analysis Centre.

The seasonally adjusted annual rate of urban starts decreased by 3.7% to 162,800 units in August. Urban multiple starts fell 3.7% to 97,800 units, while single urban starts slipped by 3.6% to 65,000 units.

Rural starts were estimated at a seasonally adjusted annual rate of 20,500 units.

Economists had expected the supply of housing to begin to decline, as demand has dropped considerably.

“This U-turn is not surprising given that it follows the 30% decline in existing home sales seen this year through July,” said Robert Kavcic at BMO Capital Markets. “Canadian housing demand has cooled significantly this year.”

This trend is expected to continue in the months ahead.

“Over the next few quarters, we forecast housing starts to continue to ease, down near 170K units in Q4,and bottoming in the 150-160K range by mid-2011,” said Pascal Gauthier, senior economist at TD Economics. “We expect residential investment to be drag on real GDP for the next 5-6 quarters before picking back up in 2012.”

In August, the rate of housing starts was sharply lower in Atlantic Canada’s urban centres, falling to 8,800 units, from 12,400 in July. Steep drops were also experienced in Quebec and the Prairie region.

Ontario experienced a hefty increase in the rate of starts, to 59,400 units, from 51,400 in July. British Columbia also enjoyed increased activity, to 25,400 units, from 20,100 in July.

New home prices slip in July

Meanwhile, Statistics Canada reported on Thursday that the New Housing Price Index decreased by 0.1% in July, following a 0.1% increase in June. This was the first decrease at the Canada level in 13 months.

The top contributors to the monthly decrease were Vancouver, London and Greater Sudbury and Thunder Bay, the government agency said.

Prices increased in just three of the 21 metropolitan areas, with the largest gain in Kitchener–Cambridge–Waterloo, at 0.6%.

Year over year, the index was up 2.9% in July, following a 3.3% increase in June.

The largest year-over-year increase was recorded in Regina, at 6.9%, followed by St. John’s, at 6.1%.

IE