Canada housing starts, permits drop, prices flat as market cools

Thu Jan 9, 2014 9:49am EST
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By Andrea Hopkins

TORONTO (Reuters) - Canada's once-hot housing market showed signs of cooling as 2013 drew to a close, with building permits and housing starts falling and prices leveling off in the final months of the year after a strong summer and fall.

Three separate reports released on Thursday showed the same cooling trend, with weaker-than-expected readings for November's new housing price index and building permits, and December's housing starts.

Economists widely expect the Canadian real estate market to cool further in 2014 as slow economic growth puts prices out of reach for many and builders pull back to let demand catch up with a raft of new projects, mostly condos, coming online.

Building permits fell by a sharper-than-expected 6.7 percent in November, more than double the 3.0 percent pullback expected by analysts, while housing starts dropped to 189,672 units in December, shy of economists' forecasts for 190,000.

"The decline (in building permits) is in line with our expectation that residential construction will soften in the coming year in the face of affordability challenges to a pace more in line with underlying demographics," CIBC World Markets economist Peter Buchanan said in a research note.

Statistics Canada said Canada's new housing price index did not change in November, after a 0.1 percent rise in October, with prices rising in eight metropolitan areas, unchanged in eight and declining in five.

The median forecast in a Reuters survey of analysts was for a 0.1 percent rise in November from October. Year on year, prices were up 1.4 percent, the slowest since a 0.9 percent rise in February 2010.

The Canadian government, which intervened in the mortgage market several times since 2008 to cool the sector, had long expressed concerns the housing market might overheat, but it has lately said a soft landing was more likely.   Continued...

A builder works on the the roof of a new home under construction in the Montreal suburb of Brossard August 10, 2010. REUTERS/Shaun Best