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Canadian building permits surge in July

H.S. Borji
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Canadian building permits surge in July

Canadian building permits rose in July for the fourth consecutive month, defying expectations for a broad cool down in the housing sector.

The value of building permits increased 11.8 percent in July to $9.2 billion, following an upwardly revised gain of 16.4 percent the previous month, Statistics Canada reported today in Ottawa.

A median estimate of market analysts called for building permits to plunge 10 percent amid expectations for an eventual slowdown in housing activity.

Compared to July 2013, the value of permits was up 13.3 percent, official data showed.

Building permits, which are used to index future residential and non-residential construction activity, has been on the rise since the beginning of the year.

Authorizations for residential projects increased for the fifth consecutive month, advancing 18 percent to $5 billion in July. Growth was registered in seven provinces, led by Ontario and British Columbia.

Authorizations for multi-family dwellings surged in July, rising 43.4 percent to $2.5 billion, largely as a result of higher construction intentions for apartment buildings in Ontario and British Columbia. Permits for multi-family dwelling units had declined 4.5 percent in June.

Permits for single-family dwellings decreased 0.5 percent in July, following three consecutive months of increases.

The value of non-residential building permits rose 5.2 percent to $4.2 billion, a new record high. July marked the fourth consecutive month non-residential building permits increased. Gains were registered in six provinces, led by Manitoba.

Institutional buildings led the increase, rising 28.4 percent to $1.8 billion, largely as a result of higher construction intentions for medical buildings in Quebec and Manitoba.

Permits for commercial projects rose 2.6 percent to $1.8 billion, following a 2.3 percent drop the previous month, official data showed. Five provinces reported growth in the commercial component, led by Ontario and Quebec.

In total, 21 of 34 census metropolitan areas reported higher building permits in July, led by the cities of Toronto, Vancouver and Hamilton, official data showed.

The Canadian Mortgage and Housing Corporation expects a broad slowdown in housing activity sooner rather than later, as builders look to reduce inventories. The CHMC predicts sales will range between 450,800 and 482,700 this year and 455,800 to 502,900 next year.

However, other analysts don’t expect a soft landing to materialize until interest rates begin rising, something not expected to occur before the middle of 2015.

The Bank of Canada held its target for the overnight rate at 1 percent last week, citing “risks associated with household imbalances,” among other factors. That marked the fourth consecutive year interest rates were left unchanged.

The central bank expects the economy to operate below capacity until the middle of 2016, giving it plenty of scope to keep interest rates low.

Statistics Canada on Tuesday will report on August housing starts. Groundbreaking is forecast to fall to a seasonally adjusted annual rate of 195,500, down from 200,100 the previous month.

StatsCan on Thursday will report on new housing prices in July. The new housing price index is forecast to increase 0.2 percent in July, following an identical increase the previous month.

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