Toronto, Vancouver Condos Lead Record Canada PermitsGreg Quinn
Canadian building permits jumped to a surprise record in July, led by Toronto and Vancouver condominiums and apartments, at a time when the central bank says high home prices and indebted consumers remain a key risk to the economy.
Nationwide, permits rose 11.8 percent to C$9.16 billion in July, confounding economists in a Bloomberg survey who forecast a 5 percent decline. Residential and non-residential permits both reached records, rising 18.0 percent and 5.2 percent respectively.
Home sales and prices have shown unexpected strength this year as the lowest mortgage rates in decades spur demand. Policy makers including Finance Minister Joe Oliver have singled out the surge in condominium construction in Toronto and Vancouver for concern.
“All eyes are going to remain on Toronto’s new home building market over the next few months,” said Derek Burleton, deputy chief economist at Toronto-Dominion Bank.
“This does fit in with where the risks are tilted at the moment, and that’s a housing market that isn’t going to slow as much as most had expected this year,” he said, adding that today’s gain could still represent a temporary rebound after a tough winter deterred house hunters.
The value of municipal permits for multi-unit housing jumped 43.4 percent to C$2.54 billion, Statistics Canada said today in Ottawa. Total permits in Toronto rose 29.6 percent to C$1.65 billion while Vancouver surged 46.1 percent to C$718 million.
Bank of Canada policy makers said last week that risks posed by “imbalances” in household finances remain, as they kept their key interest rate at 1 percent.
“Low interest rates and an improving economic outlook are seemingly encouraging builders to apply,” Krishen Rangasamy, senior economist at National Bank Financial in Montreal, wrote in a research note. “It’s unclear, however, if all those permits will translate into actual construction in the multi category where there is reported excess supply in some cities.”
Municipalities approved 14,050 multi-family housing units in July, a gain of 35.2 percent from June and 23.8 percent from a year earlier. The number of units approved for single-family residences fell 0.6 percent on the month to 6,461 units and rose by 1.3 percent from 12 months earlier.
The condo market is booming because of how expensive single-family homes are in Canada’s big cities, Canadian Imperial Bank of Commerce deputy chief economist Benjamin Tal said in a note before the Statistics Canada data was released.
The average home resale price in Vancouver was C$824,352 ($755,250) in July, the Canadian Real Estate Association said Aug. 15, a 6.3 percent increase from a year earlier. In Toronto the average price rose 7.3 percent over that time to C$560,882.
The gain in non-residential activity was led by government spending, rather than the business investment Bank of Canada Governor Stephen Poloz said is needed to bring about a sustainable recovery. Institutional spending rose 28.4 percent, while commercial projects rose 2.6 percent and industrial buildings dropped by 32.6 percent.
“The gain in Toronto was driven by higher construction intentions for multi-family dwellings and, to a lesser extent, institutional buildings,” Statistics Canada said today. “The increase in Vancouver came mainly from multi-family dwellings.”
The Canadian dollar remained weaker after the report. The currency depreciated 0.3 percent to C$1.0915 per U.S. dollar at 10:56 a.m. Toronto time.