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Canadian housing starts fell 8.6 per cent in May from April, a decline fuelled by a massive pullback in new home construction since Ontario moved to cool the housing market in Toronto.

“The story in May was the big drop in Ontario, following the new housing rules the province implemented on April 20th,” said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets.

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He noted Toronto starts dropped 44.4 per cent, following a 22.7 per cent decline in April, to about 22,600. It was the lowest level for starts in the city since September, 2014.

“Don’t be surprised if activity remains subdued for at least a few more months as the housing market digests the changes. The surge in existing home supply we’ve seen over the past two months, could also help restrain home building activity as buyers have more choices,” said Reitzes.

The decline in Toronto and around Southern Ontario follows a provincial decision to unveil a 16-point plan to cool the housing market which included a 15 per tax on foreign buyers and tougher rent control rules which restrict how much landlords can charge tenants in buildings constructed after 1991 — a move impacting condo investors looking for income property.