Thursday, December 07, 2006

Canada's Housing Cools

The value of building permits unexpectedly jumped 6.1 %in October from September, hitting the second highest level on record as builders planned more multifamily houses and commercial units.

Other data on what has been a red-hot housing market have been mixed. Recent figures showed a decline in house sales and prices in the key market of Calgary. And construction industry groups pointed to a drop in overall activity this year and next.

The October housing report contradicted the gloom, but it is typically a volatile indicator and that the monthly upturn does not spell a trend.

But the Calgary Real Estate Board reported this week that existing home sales in that city fell 11.5 % in November from a year ago and that home prices fell 3.6 % from October. The year-over-year increase in prices was 36.4 %, down from 50-% figures seen in the summer.

Even with some cool down in the housing market more broadly, it's important to put it in perspective. It's coming off just incredibly high levels in the summer and when you look at the year as a whole it looks like home sales will be just shy of a record high.

Residential building permits jumped 4.3 % as intentions for multifamily dwellings jumped to their second highest level on record due to the booming economy in oil-rich Alberta.

Nonresidential permits soared 9.1 % to a record C$2.41 billion due to a sharp rise in commercial permits, especially in Alberta and British Columbia.

As for investment in housing construction, it is expected to drop 1.1 % this year and a further 0.1 % in 2007.

Overall, we see growth in construction investment -- including residential and nonresidential -- dropping to 1.7 % next year from 3.4 % this year.


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