The Canadian economy surprised once again today, as construction began on more new homes than economists expected in February, according to the latest data from the Canada Mortgage and Housing Corp.

The seasonally adjusted annual rate of housing starts was 256,900 units in February, up from 222,700 units in January, said the CMHC.

“The robust results achieved this month are mainly attributed to increased condominium starts, which reflect strong condominium sales over the past year or two. Despite this sizeable growth in February, we continue to expect that the trend in housing starts will decrease gradually between now and the end of 2008,” said Bob Dugan, chief economist at CMHC’s Market Analysis Centre, in a release.

This increase in condo development is shown in the 30.3% rise in starts in the “urban multiples” category, to 140,700. Overall, the rate of urban starts in February increased a seasonally adjusted 18.0% to 223,700 units compared to January, while singles rose 1.8% to 83,000 units.

Despite the unexpected surge in new home starts, economists are predicting the party can’t last, and home building activity will begin to slow. “Residential construction in Canada continues to escape the storm ravaging the sector south of the border and to provide solid support for our domestic economy,” wrote senior BMO economist Robert Hogue in a morning note. “However, the deterioration in affordability and growing economic uncertainty should gradually slow home building activity in the months ahead.”

The growth in building activity in the last few years has been “breathtaking,” according to TD Securities economics strategist Millan Mulraine. He expects Canada’s strong labour market, wage growth and enticing mortgage rates to keep activity in the Canadian housing market in “fairly good shape through 2008.”

Overall, it was the traditionally volatile urban multiple category that led the rise. Urban multiple starts were up in all regions except in the Atlantic and the Prairies. “New home construction in February was boosted by the significant rise in multiple-family starts,” said Dugan.

Economists agree this tempers the strength of the data. “The shift towards multi-unit dwellings also raises the risk of increased volatility in the sector,” wrote Hogue.