Housing market is emerging from the ‘deep freeze’
Canada’s housing industry is booming with construction permits surging as developers respond to strong demand, according to new data published Tuesday.
Building permits rose 6.1 per cent in August to $9 billion, compared to a one-per-cent increase estimated by analysts, largely because of increases in multi-family and industrial permits, Statistics Canada reported.
Quebec led the gains with more than a third of the value, while six other provinces reported increases, the agency said.
“On the residential side, the number of units came in at 247,000 annualized in the month, flagging continued strength in housing starts down the road,” wrote Robert Kavcic, senior economist, at BMO Capital Markets.
“Indeed, the year-to-date average for permits is a lofty 237k, so it looks like there’s plenty in the pipeline to keep residential construction activity humming.”
Housing starts were solid but fell 2.5 per cent in September on an annualized basis to 221,202 from 226,871 in the previous month, Canada Mortgage and Housing Corp. said. Single-detached starts fell by eight per cent to 58,600 units during the month, but remain above the trough posted earlier in the year.
Meanwhile, multi-unit starts were flat at 162,000 units.
“September’s outturn caps a strong third quarter for new housing construction which, alongside a probable increase in home sales, points to a healthy gain in residential investment,” noted TD Canada economist Rishi Sondhi.
CIBC Capital Markets’ Avery Shenfeld was less impressed.
“Overall, while we could get some growth from real estate agents fees and renovations, the pop in GDP growth we got from housing in Q2 is likely to be less vigorous in the next couple of quarters,” the economist said.
Combined, the two sets of data reflect strong demographic demand, both from international inflows and new households created within Canada, Kavcic said.
“That was somewhat stronger than expected and continues the relentless level of building activity.”
Ontario, which needs “every last unit at this point,” according to Kavcic, and B.C. lead the boom fuelled by population inflows and resilient economies.
Construction activity in B.C. has mostly maintained its drive despite a correction in the number of resold houses and a fall in prices after the government imposed tighter mortgage and foreign ownership rules, analysts noted.
The CMHC and Statistics Canada reports “provide further evidence of strength returning to the housing market after it went into a deep freeze following the introduction of a mortgage stress test and other measures,” Nikita Perevalov, senior economist at Scotiabank Economics in Toronto, said in a note.
B.C. led the gains in the value of permits for multi-family dwellings, mostly because of high property values in Vancouver, Statistics Canada said.
Ontario led single-family dwelling permit increases.
Overall, the value of residential permits grew 19 per cent to $3.3 billion in August from July.