By David Ljunggren and Andrea Hopkins
OTTAWA, March 8 (Reuters) - Canadian housing starts rose unexpectedly in February and building permits surged in January as demand for condos continued to bolster an otherwise slowing market in Toronto, Canada's largest city, separate reports showed on Thursday.
Groundbreaking for new homes rose to a 229,737 unit annual rate in February, defying expectations for a flat month, as a surge in construction of new buildings with multiple units, typically condos, more than offset a slowdown in single-detached starts, the Canada Mortgage and Housing Corporation said.
Housing starts in Toronto trended higher last month as groundbreaking on apartments hit a record, the CMHC said.
Condo demand has been strong in Toronto and Vancouver, in part because it is the only affordable housing left after a long boom spurred double-digit price rises in detached housing.
But the introduction of a foreign buyers tax in both cities in recent years as well as tighter mortgage rules that took effect in January and rising mortgage rates are expected to curb overall demand, and analysts were divided over whether the market would crash or manage a soft landing.
"We'll see how much tempered speculative demand and rising interest rates soften activity later in the year, but recent policy measures have largely hit higher-end prices, while underlying demand of for units, especially in the mid-range of the market, remains strong," said Robert Kavcic, senior economist at BMO Capital Markets, said in a research note.
A separate report from Statistics Canada confirmed condo strength, showing the value of Canadian building permits rose by 5.6 percent in January, the most in eight months, on higher construction intentions for multi-family homes in Ontario.
The increase - significantly greater than the 1.3 percent advance predicted by analysts in a Reuters poll - was the biggest since a 12.9 percent jump in May 2017. Statscan revised December's gain to 2.5 percent from an initial 4.8 percent.
The value of permits for multi-family dwellings in Ontario, the most populous province and home to Toronto, soared 71 percent, more than offsetting a 39.7 percent drop in December.
A third report showed new home prices were unchanged for a second month in a row in January as Toronto saw a 0.1 percent decline, the first decrease since July 2014. (Editing by Bernadette Baum)