Canada housing market shows signs of slowing, but prices rise

Thu Dec 8, 2016 10:13am EST
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By Andrea Hopkins

OTTAWA (Reuters) - Canada's housing market showed some signs of softening in November as new construction starts fell, but separate data showed prices rose in October and permits for future building jumped, suggesting the market could have strength in reserve.

Housing starts fell 4.3 percent to 183,989 units in November from a month earlier as construction of multiple-unit buildings in Ontario dropped sharply, offsetting strong growth in British Columbia, the federal housing agency said.

The decline in starts was sharper than analysts had expected but a separate report showed the value of building permits jumped 8.7 percent in October, suggesting housing starts could bounce back in the coming months.

New home prices also continued to rise in October as the red-hot Toronto market offset cooling elsewhere, extending the long boom in Canadian house prices even as analysts brace for a slowdown after government moves to rein in mortgage lending.

"Residential activity remains a highly regional story in Canada. You know the short version of it by now — strength in Toronto and Vancouver, but weakness in Alberta," BMO Capital Markets Senior Economist Robert Kavcic said in a research note.

Canada's housing boom has been slowing unevenly in recent years. The oil slump has dragged down housing sales and prices in the energy heartland province of Alberta, and Vancouver slowed sharply after the government introduced a 15 percent tax on foreign buyers in August.

But Toronto, the nation's largest city, has continued to soar despite repeated moves by the federal government and regulators to tighten mortgage lending rules to protect borrowers and banks from risky debt.

The report from the Canada Mortgage and Housing Corp showed housing starts softening after a strong 2015 and early 2016. Construction of multiple units, typically condos, dropped 7.7 percent in November, while single-unit starts were essentially flat.   Continued...

Homes undergo construction in Toronto, February 25, 2014. REUTERS/Aaron Harris