The Canadian construction industry scaled back its plans in January after an extraordinarily ambitious December, with the value of building permits in January falling by 12.3%, according to Statistics Canada data released on Wednesday.
The drop wiped out December’s 10.5% advance, which had taken building permits to a seasonally adjusted 4-1/2-year high. The median forecast in a Reuters survey of analysts was for only a 4% decline.
Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have voiced concern about how heated Canada’s housing sector has become, particularly in condos.
The value of permits in the housing sector fell by 6.6% after three consecutive monthly gains. The biggest drop was in multi-family dwellings, which fell 12.4% after a 30.8% surge in December.
One of the hottest markets is Toronto, where building permits fell 6% after December’s 27.5% spurt. Aside from the December peak, the January level for Toronto was still the highest since March 2011.
The non-residential sector fell 23.1% after eking out a 0.3% gain in December, with the commercial, institutional and industrial components all falling broadly.
CIBC World Markets economist Emanuella Enenajor said that given the month-to-month volatility in the data series, market reaction would be muted.
A separate report by RBC Economics Research said housing had become slightly more affordable for homeowners in the fourth quarter of 2011.
It said the cost of owning a detached two-storey home - adding mortgage payments, utilities and property taxes - took 48.1% of the median household pre-tax income, down from 48.9% in the third quarter.
It would take a whopping 92.3% of the median household income in pricey Vancouver, down 2 percentage points in the quarter.
The average price of a two-storey home is $845,000 in Vancouver and $602,000 in Toronto, compared with $395,500 for Canada as a whole.
(Reporting by Randall Palmer; Editing by James Dalgleish and Rob Wilson)