Canada housing seen slowing, building permits drop

Mon Nov 5, 2012 11:57am EST
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By Andrea Hopkins

TORONTO (Reuters) - The pace of homebuilding in Canada will continue to moderate in the last quarter of 2012 and into 2013, while existing home sales should hold steady and prices climb at or just below the inflation rate, Canada Mortgage and Housing Corp says.

The federal housing agency's forecast on Monday for a weaker, but still healthy, housing sector echoed a string of data that has shown Canada's recently red-hot real estate market cooling, but without signs of a crash landing.

"A weaker outlook for global economic conditions and the waning of the effect of pre-sales from late 2010 and early 2011, which contributed to support multi-family starts this year, will bring moderation in housing starts next year," Mathieu Laberge, deputy chief economist at CMHC, said in the agency's fourth-quarter outlook.

"Nevertheless, employment growth and net migration will help support housing starts activity going forward," he added.

Canada's housing market, which roared higher in 2011 and the first half of 2012 aided by low interest rates, started slowing after the government tightened rules on mortgage lending in July in a bid to cool things down and prevent home buyers from taking on too much debt.

Statistics Canada data released on Monday showed the value of building permits fell by an unexpectedly large 13.2 percent in September from August, dragged down by a major drop in the non-residential sector, but with housing permits holding steadier.

The overall fall in permits - the biggest since a 23.7 percent plunge in April 2011 - was far greater than the 3.0 percent decrease forecast by market operators. Statscan revised August's advance to 9.5 percent from an initial 7.9 percent.

But the value of residential permits climbed by 0.4 percent after two monthly decreases. Single-family dwellings advanced by 3.4 percent, while multi-family dwellings dropped by 3.8 percent, suggesting some strength remains on the housing side.   Continued...

The Toronto Skyline with a condominium building under construction (L) is shown in downtown Toronto, May 14, 2009. REUTERS/ Mike Cassese