Housing starts rose 12% in August to 217K units. The gains were primarily driven by multiple-unit construction, which rose nearly 20% on the month. Starts of single family homes rose a more modest 1.4%.

Housing starts are volatile on a monthly basis, and analysts typically focus on the average pace of sales over the past six-months to gauge construction trends. The trend level of housing starts in august also rose to 197K units from 186K in July, continuing an upswing so far in 2015.

CMHC cites that strong condominium construction activity in Toronto has been supporting the uptrend in starts, as deteriorating affordability of single-family homes shifts demand toward lower-priced alternatives.

The new home construction situation varies across the country. While starts may be trending up on a national level, construction has started to slow in Alberta and Saskatchewan as lower oil prices restrain income growth. Provincially, urban housing starts rose in Ontario, but declined in B.C., the Prairies, Atlantic Canada and Quebec.

Never underestimate the Canada's housing sector's ability to surprise to the upside. Or perhaps more precisely in August - Toronto's housing market. As discussed in our latest regional housing outlook "The Power of Low Interest Rates", new home construction had been expected to pick up in the second half of the year in Toronto, given the recent rise in new home sales. However, these new units will only add to what we believe to be a rising inventory of condos, setting the stage for a weaker level of starts in 2016.

"Canada's housing market looks set for another strong year in 2015, supported by low interest rates. However, the majority of strength has been concentrated in B.C. and Ontario. These regions are supported by relatively positive demographics and their economies aren't feeling the full impact of the collapse in prices. Gradually higher borrowing rates next year should contribute to an easing in the pace of new home construction to a more sustainable 165-170K units next year", says TD Economics.