OTTAWA – Canada’s housing market continues to confound in its resilience in the face of forces that point to a correction from sky-high levels.
Statistics Canada reported Wednesday that building permits jumped 10.5 per cent in April — 21 per cent on the residential side — a shock to economists that had expected an overall three per cent decline.
Analysts noted that permits are merely intentions to build and don’t always translate into actual starts, but agreed the result was unexpected.
It was the fourth consecutive monthly increase for permits, although previous gains were more modest, after a downward trend that began in the fall of 2012.
In a related report Wednesday, the Toronto Real Estate Board said May home sales in the region slid 3.4 per cent from a year ago — as expected — but the average selling price remained remarkably frothy, rising 5.4 per cent to $542,174.
Home sales and housing starts have generally been falling across the country since last summer after Ottawa tightened mortgage lending rules in an conscious effort to slow down what was considered an overheated market. However, prices have remained firm.
In a OECD analysis of global trends, Canada was listed — along with Norway, New Zealand and to a lesser extent Sweden — among countries in the danger zone, where homes “appear overvalued but prices are still rising.”
CIBC deputy chief economist Benjamin Tal says he is not convinced Canada’s housing market is preparing for a spring jump forward, saying that the overall trend remains toward a pull-back.
“There’s a big difference between permits and the willingness to go ahead and break ground if they are having difficult selling, especially in the high-rise market,” he said. However, should future months also point to strong growth in intentions, “we will have to re-think the situation because then we have a market that is doing something it should not be doing.”
The April advance surprised on several fronts.
Construction intentions for condos, a segment believed most primed for a downward spiral, rose 51.9 per cent in April, with most of that coming in Ontario, British Columbia and Quebec. Permits for single-families dwellings inched up just 1.1 per cent.
All the gains in building intentions was on the residential side, which rose 21 per cent to $4.4 billion
Non-residential permits fell 3.6 per cent to $2.6 billion. The total $7 billion value of permit for April remains below the peaks reached in 2012, however.