Canadian building permits unexpectedly rose in April led by multiple-unit housing in Vancouver, a market that officials have said shows signs of overbuilding fuelled by record consumer debt.
The value of municipal permits rose 10.5% to $6.96 billion, following a revised 6% rise in March, Statistics Canada said Wednesday in Ottawa. The gain was the fourth in a row, the longest streak of increases in a decade. Economists forecast a 3% decline in April, according to the median of 11 responses to a Bloomberg survey.
Emanuella Enenajor, an economist at CIBC World Markets, noted that Statistics Canada revised the initial March numbers downward Wednesday, but said the second quarter appears to be shaping up to be stronger than the first quarter.
“Note that this series tends to be choppy, although today’s data release suggests that despite softening condo-building activity, construction there could be set for one last hurrah,” Enenajor said in a research note.
“Overall, today’s number suggests that despite a slowing trend in homebuilding, condominium construction still has some steam left. That could support Q2 residential activity somewhat, after the sector’s drag to Q1 GDP.”
Surging home construction has helped drive household debts to a record 165% of disposable income, a ratio the central bank says should stabilize as housing investment wanes. Bank of Canada Deputy Governor Timothy Lane said June 4 in Seoul there are signs of a “constructive evolution” in household finances after “imbalances” built up.
Residential permits rose 21% to $4.35 billion in April, Statistics Canada said Wednesday. Permits for housing projects such as apartments and condominiums jumped 51.9% to $2.15 billion, and single-family permits rose 1.1% to $2.21 billion.
Vancouver made one of the largest contributions to the national increase among 34 cities, Statistics Canada said, with permits rising 50.7% to $645 million led by multi-family dwellings. Calgary permits also rose 40.6% to $773 million on commercial buildings.
Condo Overbuilding
Finance Minister Jim Flaherty tightened mortgage rules for a fourth time last year on concern that there has been an overbuilding of condos in cities such as Toronto and Vancouver.
Permits for non-residential construction fell 3.6% to $2.60 billion in April from March, as declines for industrial and institutional projects exceeded a gain in the commercial group.
The value of permits was 5.4% higher in April than the same month a year earlier, with multiple-unit housing 40.4% higher on the year.
Demand for homes has been supported by some of the lowest mortgage rates in decades, with the Bank of Canada reporting the average for a five-year fixed rate loan was 5.14% last week. The central bank has kept its overnight interest rate at 1% since September 2010 to encourage borrowing and spending, and has said business investment and exports will help lead the economic expansion.
With file from Canadian Press
http://business.financialpost.com/2013/06/05/surprise-spike-in-building-permits-signals-condo-building-set-for-one-last-hurrah/?__lsa=2a8e-a67b