A rise in housing starts in January provides further indication that Canada’s housing market is holding firm as its counterpart south of the border crumbles.

The seasonally adjusted annual rate of housing starts was 222,700 units in January, up from 184,700 units in December, according to Canada Mortgage and Housing Corporation (CMHC) data released today.

“Historically low mortgage rates, solid employment and income growth as well as a high level of consumer confidence continue to underpin the high level of housing starts,” said Bob Dugan, chief economist at CMHC’s market analysis centre. Dugan said forecasts are for housing starts to total 211,700 units in 2008, which would put them above the 200,000 mark for the seventh consecutive year.

“Even so, housing construction is expected to slow moderately during 2008, which will restrain growth in coming quarters,” said Robert Hogue, senior economist at BMO Capital Markets, in a morning note.

In January urban housing starts rose a seasonally adjusted 25.2% to 189,500 units compared to December. The volatile urban multiples component surged 64.1% to 108,000 units in January, while the more stable urban singles fell 4.8% to 81,500 units.

Four of Canada’s five regions saw increases in housing starts, led by Ontario at 43.7% and Quebec at 22.4%. Only the Atlantic region registered a decline, falling 17.4% in January.

Actual starts in rural and urban areas combined, decreased by an estimated 11.1% in January, compared with the same period last year, according to the CMHC.

The Canadian market has thus far been insulated from the meltdown south of the border. “So far, north of border, we haven’t experienced what our U.S. counterparts are going through due to several factors which are not applicable to Canada,” said Alex Haditaghi, CEO of MortgageBrokers.com, yesterday. “In our opinion, looking forward, we expect a strong 2008 and 2009 for the Canadian mortgage and housing markets.”

Economists at TD Securities are expecting the market to remain in good shape in 2008. “Though we expect it to fall below the blistering pace recorded in 2007,” said TD Securities economics strategist Millan Mulraine, in a morning note. “This is on account of the favourable labour market conditions, the continued strong growth in labour income, and the expected drop in mortgage rates, as the Bank of Canada continues to lower the policy rate.”