BC’s condo swoon drives down national building permit numbers
Posted: Jan 10 2011 Topic:
Building permits, a key measure of future construction activity and the direction of the housing market, took a sudden plunge in November, down 11.2 per cent to $5.5 billion while analysts had expected a gain of 1.5 per cent.
It was the second straight monthly drop, and the biggest in almost two years, going back to February 2009. Statistics Canada revised its reading for October to a decrease of 6.2 per cent from an initial estimate of a 6.5 per cent decline.
The November decline was driven by a drop in the value of permits issued by municipalities for commercial space, off 23.4 per cent to $1.26 billion, and for multi-family dwellings such as condominiums, down 22.4 per cent to $1.08 billion, the federal agency reported.
Overall, residential permits fell by 7.2 per cent to $3.2 billion and non-residential permits fell 16.1 per cent to $2.3 billion.
The largest declines occurred in British Columbia, Ontario and Newfoundland and Labrador, the federal agency reported.
In British Columbia, residential permits fell by 51 per cent, mainly due to the reduction in multi-family dwellings.
Scotia Capital economist Derek Holt cautioned not to take “this huge miss so much as a gauge of housing market or business investment sentiments and treat it more as signalling volatility in lumpy condo and commercial projects.”
Looking at it by the number of housing units involved — as opposed to the value of the permits issued to build them — the monthly decline was almost entirely due to a 24.1 per cent drop in multiple units centred largely in B.C., Holt wrote in a note.
In fact, he added, single-family permits rose slightly in November but are off more than 25 per cent from a year ago.
“The fact that the supply side has cooled off markedly with builders sharply pulling in their horns is one reason why downsides to house prices are more constrained. Indeed, single family inventories are fairly lean as opposed to still bloated condo inventories.”
Canadians will get a clearer sense of the housing market’s direction when Canada Mortgage and Housing Corp. reports on December housing starts Tuesday.
The consensus of analysts is for 180,000 starts, compared to 188,100 starts in the previous month. If the number is on target, it would be the fourth decline in five months.