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Canadian building permits surge in May

H.S. Borji
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Canadian building permits surge in May

The value of Canadian building permits in May advanced at the sharpest rate since July 2013, led by gains in commercial buildings, as well as a substantial increase in residential construction projects.

Building permits surged 13.8 percent in May, following a gain of 2.2 percent the previous month, Statistics Canada reported today in Ottawa.

A median estimate of market analysts called for a monthly gain of 3 percent. The most optimistic of forecasts called for a gain of around 5 percent.

Compared to May 2013, permits were down 6.4 percent across Canada.
Higher construction intentions were reported in 23 of Canada’s 34 census metropolitan areas, StatsCan reported.

The value of building permits – a gauge of future construction intentions – has been on an upward trend since the beginning of 2014, StatsCan said.
Nonresidential construction permits advanced 20.8 percent in May, led by a 39.4 percent climb in commercial buildings. Both gains were the largest in ten months. The value of non-residential permits increased in seven provinces, led by Ontario and Manitoba.

Permits for residential construction projects increased for the third consecutive month at a rate of 9.5 percent. Eight provinces posted gains in residential construction permits, led by British Columbia.

In the residential sector, higher construction intentions were reported in bother single-family and multi-family dwellings. Permits for multi-family dwellings advanced for the third consecutive month at a rate of 16.1 percent.
The value of permits for single-family dwellings increased for the second consecutive month at a rate of 4.6 percent. Eight provinces posted gains in this category, led by Ontario.

In total, Canadian municipalities granted construction permits for 17,415 new dwellings in May, up 11.8 percent from the previous month.

Today’s data suggest the housing sector has thus far eluded the Bank of Canada’s forecast for a soft landing. The housing market, which is considered over-heated by many, continues to be supported by low mortgage rates and lower debt aversion. BOC Governor Stephen Poloz expects the housing sector to cool as record-high consumer debt begins to stabilize.

The BOC in its semi-annual review noted that a sharp correction in housing prices is unlikely to occur. However, the central bank was worried that large markets such as Toronto continue to race forward. Price increases, while moderating, are still growing much faster than disposable income.

Economists have been surprised by the resilience of Canada’s housing market. Earlier this month Toronto-Dominion Bank – one of Canada’s largest financial institutions – boosted its forecast for the housing sector, citing record low mortgage rates as one of the biggest factors for the underlying demand.

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