* Institutional and commercial categories see gains
* Permits in housing sector fall
* Construction to boost growth in second half
By Louise Egan
OTTAWA, May 7 The value of Canadian building permits
unexpectedly climbed in March even while plans for home building softened for
the third straight month, Statistics Canada reported on Monday, likely calming
nerves among policymakers troubled by soaring property prices and debt.
Building permits issued by municipalities jumped 4.7 percent from February
t o C$6.5 billion ($6.5 billion), confounding market expectations of a 2.8
The increase followed a 7.6 percent gain in February, according to revised
Intentions for residential buildings fell 1.3 percent in March as the value
of permits fell by 1.7 percent for single-family dwellings and by 0.7 percent
for multi-family dwellings.
Permits for non-residential buildings jumped 13.9 percent to C$2.9 billion
($2.9 billion), their highest level since June 2010. Plans for new government
buildings and medical facilities in the province of Ontario helped push up
construction intentions in the institutional sector by 88.4 percent.
Permits for commercial buildings rose 15.3 percent in value while those for
industrial structures fell 42.8 percent.
The report is consistent with the Bank of Canada's prediction of stronger
business investment in months ahead and suggests construction activity will
provide a boost to economic growth, despite the weaker housing component.
"Although residential building plans cooled in the first quarter, the recent
solid gain in full time employment in March, together with evidence a stronger
sales of existing houses through April, suggests that residential construction
and house related consumer spending will make a positive contribution to
domestic demand into the second half of the year, said John Clinkard, economist
at Deutche Bank in Canada.
The decline in permits for housing adds to evidence from other data showing
the heated housing market is cooling and may be in for a soft landing this year,
though hot spots such as Toronto's condo market persist.
"Although housing starts data have been buoyant lately, the recent softening
trend in residential permits suggests that the pace of homebuilding may slow in
the months ahead," said Emanuella Enenajor, economist with CIBC World Markets.
Canadian home prices fell 0.5 percent in March from a year earlier,
according to the Canadian Real Estate Association, which also showed a 3.1
percent drop in Vancouver property prices.
With interest rates still extraordinarily low at 1.0 percent, Canadians have
sharply increased their debt load to finance home purchases at a time of sky
rocketing prices, especially in Vancouver and Toronto.
In fact, the household debt-to-income ratio has surpassed that of the United
States and Britain, leading Bank of Canada Governor Mark Carney to single it out
as the biggest domestic threat to Canada's economy.