Mortgage rules take bite out of Canada building permits

Thu Feb 7, 2013 11:23am EST
 
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By Randall Palmer

OTTAWA (Reuters) - Tighter Canadian mortgage rules appear to have put a serious damper on the housing market, especially on the heated condominium sector, judging by Statistics Canada data released on Thursday.

The value of Canadian building permits fell 11.2 percent in December after a 14.5 percent decline in November. That was the biggest two-month drop fall since the data series started in 1989, and left the value of building permits 16.2 percent lower than a year earlier.

The median forecast in a Reuters survey of analysts was for a 5.0 percent rise in the value of building permits in December.

The government set new mortgage rules and guidelines in June to cool what it had worried was becoming a housing bubble.

Permits for multi-family housing, which include condominiums, fell 24.6 percent and were 41.1 percent lower than in June. Permits for single-family dwellings fell 5.3 percent, the third straight decline.

"Today's figures suggest Canada's homebuilding sector could be a drag on activity in late 2012/early 2013, and the recent trend in slowing permits bodes poorly for tomorrow's housing starts reading," Emanuella Enenajor and Andrew Grantham of CIBC World Markets wrote in a note to clients.

January housing starts data are due at 8:15 a.m. EST (1315 GMT) on Friday. A Reuters survey shows expectations the seasonally adjusted annualized rate will have fallen to 195,000 units from 198,000 in December.

Royal Bank of Canada assistant chief economist Paul Ferley said he expected to see housing construction decline to more sustainable levels in 2013-14.   Continued...