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Canadian building permits down sharply in March

H.S. Borji
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Canadian building permits declined sharply at the end of the first quarter, as marginal gains in the residential sector added further to the view the housing market was cooling after a prolonged boom period.

Building permits dropped 3 percent in March, following a revised 11.3 percent plunge the prior month, Statistics Canada reported today in Ottawa. Economists forecast permits to rebound sharply at a rate of 4.3 percent. The February drop was nearly five times more than expected.

Gains in the residential sector were more than offset lower construction intentions in non-residential activity. Six Canadian provinces, led by Ontario, reported declines in non-residential building permits. Permits for non-residential construction fell 8.8 percent to $2.3 billion, the lowest level in more than a year. Construction intentions in the non-residential sector had risen 7.4 percent the prior month.

The largest increase in building permits occurred in Alberta, the capital of Canada’s oil and gas sector. British Columbia was a distant second, followed by Nova Scotia, official data showed.

In the residential sector, building permits climbed 1 percent in March, following the biggest monthly drop since the recession. Construction intentions in the residential sector increased in five provinces, led by British Columbia and Saskatchewan.

Within the residential sector, building permits were higher for multi-family dwellings. Permits for these projects increased 7.9 percent, following a decrease of 30.7 percent the prior month. Permits for single-family dwellings fell for the fourth time in five months at a rate of 3.6 percent, official data showed.

The Canadian Mortgage and Housing Corporation will report on housing starts Thursday. Groundbreaking is expected to have climbed more than 11 percent in April. According to CMHC chief economist Mathieu Laberge, lower starts activity over the remained of the year is expected, as homebuilders adjust activity to manage inventory levels.

The Canadian dollar was treading water following the news. The loonie edged closer to 92 US cents in intraday trade before falling back to 0.9178 US. The loonie has climbed 0.6 percent over the past five days, taking advantage of a weaker US dollar that suffered a broad setback early in the week.

In US data, the Mortgage Bankers Association said today mortgage applications climbed 5.3 percent in the week ended May 2, following a decline of 5.9 percent the prior week. Unlike in Canada, where low mortgage rates continue to entice homebuyers, the US has struggled to manage its housing recovery, as rising mortgage rates and higher house costs have cooled the market.

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