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Data pipeline: Canadian Building Permits, Housing Starts

H.S. Borji
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Data pipeline: Canadian Building Permits, Housing Starts

Statistics Canada is scheduled to report on building permits Wednesday, kicking off an active second half of the week that also sees the release of housing and employment data. Wednesday’s report is expected to show building permits rebounded in March, following a double-digit decline the previous month.

The government’s statistics department could show authorizations for building projects increased 4.3 percent in March, according to a broad consensus of market analysts.

Canadian building permits have been inconsistent in recent months, partly a reflection of adverse weather but more likely a symptom of a cooling housing market. Building permits had advanced 8.1 percent in January, before plunging 11.6 percent in February, official data showed. That was the lowest level in a year. Building permits in February fell nearly five times more than forecast, as planned construction projects for family dwellings declined at the sharpest pace since the recession.

Building permits in Toronto, Montreal and Vancouver – Canada’s three largest cities – declined by an average of 20 percent in February.

Compared to the previous 12 months, the value of permits was 3.8 percent higher in February.

Investors use building permits as a guidepost for new residential construction. Tomorrow’s release will feed directly into Thursday’s report on housing starts, courtesy of the Canadian Mortgage and Housing Corporation.

March housing starts fell 17.7 percent to a seasonally adjusted annual pace of 156,823, the CMHC reported last month. Economists had forecast a reading of 191,000. The data suggests the robust housing market was cooling at the end of the first quarter. According to Bank of Montreal senior economist Robert Kavcic, housing activity in Canada will be much more subdued over the next few years as the market stabilizes following a prolonged boom period.

Housing starts last month are forecast to have reached a seasonally adjusted annual rate of 175,000, according to market analysts. New house prices are forecast to have risen another 0.4 percent in March, following a gain of 0.2 percent. House prices in the Greater Toronto Area rose 8.5 percent at the end of the first quarter, according to the Toronto Real Estate Board.

Bank of Canada Governor Stephen Poloz has forecast a “soft landing” for the housing sector, as record high consumer debt begins to stabilize. The gradual decline in home sales will therefore come as no surprise to policymakers, and should ease concerns that Canadian households may pile on more debt to buy homes.

The central bank has left its benchmark lending rate at 1 percent since September 2010. Any change to the overnight rate will depend on economic data.

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