Canada's housing sector continued on the comeback trail in August as home starts for the month jumped more than 12 per cent, according to new figures released Wednesday.

Canada Mortgage and Housing Corp. said construction companies started work on 14,177 new homes in August, for a seasonally adjusted annual rate of 150,400.

The August jump represented a 12.1 per cent increase versus July and reinforced CMHC's belief that the housing sector is seeing a sharp rise in activity.

CMHC says Canadian housing market improving in second half of 2009. (CBC)

"Housing starts are trending higher, reflecting improvements in both the single and multiple segments," said Bob Dugan, chief economist at CMHC's market analysis centre.

"The improvement in housing starts is consistent with our expectation of a stronger second half for 2009," he said.

Building rise

Similar to the American housing market, Canada's home sector has seen increased activity, both in new house construction and resale activity, in recent months.

Markets in the two countries had been pounded during the past year as a slumping economy cut house values and reduced the incentive to buy a new abode.

Thus, even with August's increase, housing starts were still down more than 25 per cent compared to the same month in 2008.

Analysts have pointed to record low interest rates and relatively low mortgage costs — currently hovering around four per cent at many institutions — as major factors underscoring the housing comeback.

In a report also released on Tuesday, RBC Economics backed up that point, noting that home affordability in Canada improved in the second quarter of the year.

B.C. gain

The big provincial winner in the CMHC figures appeared to be British Columbia as annualized housing starts reached 17,000 for the country's most westerly province. That represented a jump of 56 per cent versus July's figure.

The Prairie region was the area with the second best growth rate for August, up 16 per cent compared to the previous month while Ontario saw housing starts rise by more than 13 per cent.