Canadian home construction continues to surge ahead and defy expectations.

Canada Mortgage and Housing says B.C. and Alberta were the drivers sending  the annual rate of housing starts to just over 222,300 units in July – up from almost 213,000 in June.

T-D Bank economist Diana Petramala says the surge likely reflects strong demand for new housing from the end of last year into the start of 2017 – and the new construction market tends to lag behind real estate demand – which is beginning to drop.

Regulatory changes over the past year – including tougher mortgage qualification rules – have caused a shift for some first-time homebuyers from existing houses – to cheaper, newly built dwellings.