Canadian building permits jumped to a surprise record in July, led by Toronto and Vancouver condominiums and apartments, at a time when the central bank says high home prices and indebted consumers remain a key risk to the economy.
The value of municipal permits for multi-unit housing jumped 43.4 percent to C$2.54 billion, Statistics Canada said today in Ottawa. Total permits in Toronto rose 29.6 percent to C$1.65 billion while Vancouver surged 46.1 percent to C$718 million.
Nationwide, permits rose 11.8 percent to C$9.16 billion in July, confounding economists in a Bloomberg survey who forecast a 5 percent decline. Residential and non-residential permits both reached records, rising 18.0 percent and 5.2 percent respectively.
Bank of Canada policy makers said last week that risks posed by “imbalances” in household finances remain, as they kept their key interest rate at 1 percent. Home sales and prices have shown unexpected strength this year as the lowest mortgage rates in decades spur demand. Policy makers including Finance Minister Joe Oliver have singled out the surge in condominium construction in Toronto and Vancouver for concern.
Municipalities approved 14,050 multi-family housing units in July, a gain of 35.2 percent from June and 23.8 percent from a year earlier. The number of units approved for single-family residences fell 0.6 percent on the month to 6,461 units and rose by 1.3 percent from 12 months earlier.
“The gain in Toronto was driven by higher construction intentions for multi-family dwellings and, to a lesser extent, institutional buildings,” Statistics Canada said today. “The increase in Vancouver came mainly from multi-family dwellings.”
The gain in non-residential activity was led by government spending, rather than the business investment Bank of Canada Governor Stephen Poloz said is needed to bring about a sustainable recovery. Institutional spending rose 28.4 percent, while commercial projects rose 2.6 percent and industrial buildings dropped by 32.6 percent.