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                <p>TORONTO (Reuters) – Canadian housing starts rose 6.6 percent in February, largely on a rise in starts of multi-unit buildings, Canada Mortgage and Housing Corp said on Tuesday.</p>
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Housing starts climbed to a seasonally adjusted annualized rate of 181,900 units in February from a revised 170,600 units in January. January starts were revised up slightly from 170,400.</p>
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Analysts, on average, had forecast 173,000 starts in February.</p>
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Urban starts rose by 9.4 percent to 161,000 units, driven by a 14.5 percent rise in construction of multiple-unit buildings, mainly condominiums, in Saskatchewan and Toronto, accounting for 94,900 units.</p>
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Analysts said strength in the condo market may not continue as there has been a recent drop in building permits issued for the sector.</p>
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The closely watched single-family homes segment edged 3.0 percent higher to 66,100 units in February.</p>
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Despite the month-to-month swings in the volatile multi-unit group, the underlying trend suggests housing starts are averaging 176,000 units a month.</p>
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"Activity appears to be stabilizing around a level consistent with demographic demand," said Robert Kavcic, economist at BMO Capital Markets.</p>
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Compared with global trends in the face of the financial crisis, Canada's housing market has been resilient, due mainly to a strong banking system and low interest rates. After a brief retreat during the crisis, Canada's residential housing sector was able to post double-digit price gains in late 2009 and early 2010. Household formation has also been relatively steady.</p>
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But Canada's economic recovery is now seen depending less on consumer-driven growth and more on business and export growth. Analysts expect a combination of a likely rise in interest rates later this year and tighter mortgage rules to slow the housing sector.</p>
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"We continue to expect a softening in overall housing starts, particularly with the anticipated higher interest rates and a slower second half of the year, keeping home prices under wraps," said Krishen Rangasamy, economist at CIBC World Markets.</p>
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Atlantic Canada had the biggest fall in urban housing starts in February with a 24.7 percent drop, while Quebec followed with a 7.1 percent fall. British Columbia declined 5.9 percent.</p>
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Urban starts increased by 29.3 percent in Ontario and by 26.1 percent in the Prairie provinces.</p>
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Rural starts were estimated at a seasonally adjusted annual rate of 20,900 units in February.</p>
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(Reporting by Ka Yan Ng; Editing by Andrea Ricci and Peter Galloway)</p>
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