Published Tuesday, Oct. 08 2013, 8:33 AM EDT

Last updated Tuesday, Oct. 08 2013, 9:05 AM EDT

The number of new homes that got their start in September has come in higher than anticipated, as the housing market continues to top economists’ expectations.

Canada Mortgage and Housing Corp. said Tuesday that there were 193,637 housing starts last month on an annualized basis, up from 183,964 in August. August’s number was revised up from 180,291.

Economists had been forecasting a small rebound to 185,000 starts in September. But earlier data signalling that building permits are elevated suggested that housing starts could surpass expectations, Bank of Montreal economist Sal Guatieri noted prior to the release from CMHC.

Bank of Nova Scotia economist Derek Holt characterized September’s starts as moderately stronger than anticipated. “While residential construction is faring better than one might have expected through 2013, the Q3 contribution to growth should be fairly subdued,” he wrote in a research note.

Housing starts have defied expectations for much of the last year and a half, and remain at a level that many economists say is not supported by demographics. Economists continue to forecast a decrease in starts down the line.

“It’s not just starts, it’s permits and the resale market,” Canadian Imperial Bank of Commerce economist Benjamin Tal said in an interview. “The housing market is still surprising everyone on the upside.”

Mr. Holt noted Tuesday that the latest bump in housing starts continues to point to higher construction of multiple-unit structures (namely condos). Starts of premises with multiple units were up 5.9 per cent from August, while starts of single homes were up by only 1.4 per cent.

He also noted that the gains were driven by the Prairies, Atlantic Canada, rural areas and British Columbia. Ontario posted a surprising decline of more than 15 per cent from August.

“We continue to expect that the extended period of overbuilding in the Canadian housing market is on its last legs,” Toronto-Dominion Bank economist Leslie Preston wrote in a research note.

“We expect the next leg down in new home construction will be fairly gradual, with housing starts declining to demographically supported levels (175,000 units) by the end of next year as further interest rate increases lean against demand for new homes.”