Housing starts rose more than expected in May, with increased construction seen in both single and multiple dwelling sectors, according to Canada Mortgage and Housing Corporation.

The seasonally adjusted annual rate of starts increased to 128,400 units during the month from 117,600 in April, CMHC said Monday.

"Housing starts are expected to improve throughout 2009 and over the next several years to gradually become more closely aligned to demographic demand, which is currently estimated at about 175,000 units per year," the Crown corporation said.

Economics expected housing starts to total 126,000 units in May.

The seasonally adjusted annual rate of urban starts was up 11.1% to 107,800 units in May, CMHC said. Multiple unit urban starts rose to 60,900 units and single unit starts increased to 46,900 units -- with both categories rising by a similar 11.1% from the previous month.

"The increase in May is broadly based, encompassing both the singles and multiples segments," said Bob Dugan, CMHC's chief economist.

Overall urban starts were up 22% in Ontario, 16.8% in the Prairies, 7.3% in Atlantic Canada and 3.3% in Quebec. Meanwhile, urban starts fell 5% in British Columbia.

Rural starts were little changed at 20,600 units in May.

"The broad-based nature of the increase in residential construction activity in May was an encouraging development for this beleaguered sector of the Canadian economy," said Millan Mulraine.

"Indeed, after plunging precipitously since late 2007, and appearing to be in free-fall in recent months, this rebound may be an indication that the sector is perhaps stabilizing.

"Nevertheless, with the Canadian labour market continuing to weaken and the overall economy remaining quite soft, we expect residential building activity to remain in the current depressed range for some time."

TABLE

Housing starts in May (seasonally adjusted):

Canada, all areas 128,400

Canada, rural areas 20,600

Canada, urban centres 107,800

Canada, singles, urban centres 46,900

Canada, multiples, urban centres 60,900

Atlantic region, urban centres 7,300

Quebec, urban centres 34,200

Ontario, urban centres 41,600

Prairie region, urban centres 15,300

British Columbia, urban centres 9,400