Analysis:Ontario Leads Widespread Cdn Building Permit Drops>

--Total Permits -3.5% M/M; Residential -2.2%; Non-Residential -5.7%

     By Yali N'Diaye 

     OTTAWA (MNI) - The value of permits issued by Canadian 

municipalities, an indicator of future construction activity, fell 3.5% 

in July after rising 4.4% in June and 10.7% in May, Statistics Canada 

reported Thursday. 

     Construction intentions were lower across housing sectors and 

regions, led by Ontario. 

     Both residential and non-residential permits decreased in July, by 

2.2% and 5.7%, respectively, with single-family dwelling being the only 

category to post an increase (3.6%). 

     On a 12-month basis, growth rates were dramatically lower than in 

June, with total permits up 12.4% after rising 24.8% in June, 

non-residential permits up 16.0% after 21.1% and non-residential up 6.8% 

after 31.3%. 

     Regionally, Thursday's data showed evidence the tightening measures 

taken by the province of Ontario could be impacting activity in the 

targeted Greater Horseshoe area. 

     While construction intentions were lower in seven provinces, 

Ontario posted the largest decline (-3.7%), and the first since April, 

when Ontario announced its Fair Housing Plan aiming at cooling activity 

and speculation in the largest and tightest markets of the province, 

notably Toronto. 

     Building permits in Toronto dropped 16.2% in July, more than 

offsetting the 14.9% gain in June, and recording the largest decline 

since November 2016. 

     Instead, Vancouver posted a 6.2% increase on the back of an 11.6% 

gain the previous month, with permits in the province of British 

Columbia rising 4.6%. 

     On a sector basis, the decline in residential permits was led by a 

7.4% drop for multi-family dwellings, led by Ontario, especially Toronto 

where construction intentions for row houses decreased. 

     Single-family permits, on the other hand, rose 3.6%, although this 

was not enough to erase the 11.7% decrease the previous month. 

     In the non-residential sector, the 5.7% decrease was led by the 

commercial component, which recorded a 14.7% drop, the largest since 

September 2016, led by office buildings. 

     Elsewhere, industrial permits were down 4.0%, led by maintenance 

builds and transportation terminals, while institutional permits rose 

11.9%, led by hospitals. 

     The Bank of Canada likely welcomes the further signs of slowdown in 

the housing sector, especially in Toronto, as long as excesses unwind in 

an orderly fashion. 

     In the policy statement accompanying its decision to hike rates by 

25 basis points to 1.0% Wednesday, the BOC pointed out that "the housing 

sector appears to be cooling in some markets in response to recent 

changes in tax and housing finance policies." 

     Existing home sales continue to weaken in Canada, with a 2.1% 

decline in July, the fourth consecutive decrease. 

     Housing starts, however, rose to a seasonally adjusted annual rate 

of 222,324 in July from 212,948 in June. 

     Still, the trend was lower in Toronto, one of the areas affected by 

tighter housing measures adopted last April by the province of Ontario. 

     While the BOC signaled further tightening ahead, it continues to 

closely monitor the adjustment of the economy, with housing likely high 

on its radar screen. 

     "Given elevated household indebtedness, close attention will be 

paid to the sensitivity of the economy to higher interest rates," said 

the BOC, which would not want to precipitate a housing price crash. 

     On the price front, the Teranet-National Bank National Composite 

House Price Index rose 2.0% in July, for a 14.2% 12-month gain, 

repeating June's record, led by Toronto (28.0%). 

 --MNI Ottawa Bureau; temail: yali.ndiaye@marketnews.com

[TOPICS: MACDS$,M$C$$$]