Canadian housing starts, permits slip in latest signs of cooling

GlobeandMail.com
Nov. 8, 2016
By Andrea Hopkins

Canadian housing starts slowed in October as the once-hot British Columbia market braked sharply, while separate data on Tuesday showed the value of building permits slipped in September, suggesting the country’s long property boom is cooling.

Groundbreaking on new homes fell to 192,928 units in October, roughly in line with expectations, from a revised seasonally adjusted annual rate of 219,363 units in September, the Canada Mortgage and Housing Corp said.

The slowdown in new construction was sharpest in British Columbia, where starts dropped 44.9 per cent. Vancouver, Canada’s most expensive housing market, has come off the boil since the August introduction of a tax on foreign buyers in that city.

Housing starts in Ontario, by contrast, rose 20.0 per cent in October, suggesting Canada’s largest city, Toronto, remains red-hot, the report from the federal housing agency showed.

A long housing boom in Canada sparked fears of a real estate bubble, and the government has moved multiple times to tighten mortgage and tax rules to prevent borrowers from taking on too much debt to get into the market.

“Residential construction activity remains a highly regional story in Canada. The new development in October was the falloff in Vancouver, which could be the first sign that builders are responding to much softer demand in that region,” BMO Capital Markets senior economist Robert Kavcic said in a research note.

The addition of a 15 per cent surcharge on foreign buyers in Vancouver has cooled the most expensive segment of that market, but Toronto still sees bidding wars for many homes, particularly detached houses. The market in the rest of the country has mostly cooled.

The slowdown in housing starts was more pronounced in the multiples segment - typically condos and apartments - than in detached housing, the report showed. Multiple urban starts fell 15.3 per cent, while single-detached urban starts notched a milder 5.4 per cent decline.

A separate report showed the value of Canadian building permits fell 7 per cent in September from August, the biggest drop in eight months, though residential permits were up in the month. Analysts had expected an overall decrease of 5.6 per cent.

The decline was attributed to lower construction intentions for non-residential buildings, especially in retail complexes and office buildings.

The total value of residential building permits rose 2.6 per cent in September on construction intentions for multi-family dwellings. The non-residential sector fell 22.3 per cent, led by a drop in the commercial component.