* Dec housing starts dip to 189,672, Nov permits drop 6.7
* New house prices flat in Nov as market cools
* Economists see further cooling, not crash, in 2014
By Andrea Hopkins
TORONTO, Jan 9 Canada's once-hot housing market
showed signs of cooling as 2013 drew to a close, with building
permits and housing starts falling and prices leveling off in
the final months of the year after a strong summer and fall.
Three separate reports released on Thursday showed the same
cooling trend, with weaker-than-expected readings for November's
new housing price index and building permits, and December's
Economists widely expect the Canadian real estate market to
cool further in 2014 as slow economic growth puts prices out of
reach for many and builders pull back to let demand catch up
with a raft of new projects, mostly condos, coming online.
Building permits fell by a sharper-than-expected 6.7 percent
in November, more than double the 3.0 percent pullback expected
by analysts, while housing starts dropped to 189,672 units in
December, shy of economists' forecasts for 190,000.
"The decline (in building permits) is in line with our
expectation that residential construction will soften in the
coming year in the face of affordability challenges to a pace
more in line with underlying demographics," CIBC World Markets
economist Peter Buchanan said in a research note.
Statistics Canada said Canada's new housing price index did
not change in November, after a 0.1 percent rise in October,
with prices rising in eight metropolitan areas, unchanged in
eight and declining in five.
The median forecast in a Reuters survey of analysts was for
a 0.1 percent rise in November from October. Year on year,
prices were up 1.4 percent, the slowest since a 0.9 percent rise
in February 2010.
The Canadian government, which intervened in the mortgage
market several times since 2008 to cool the sector, had long
expressed concerns the housing market might overheat, but it has
lately said a soft landing was more likely.
The new housing price index excludes condominiums, which the
authorities have said were a particular cause for concern.
Canada's housing market avoided the crash experienced in the
United States five years ago due in part to more conservative
lending standards and a stronger economy. While economists have
long predicted an eventual correction in Canada, they are
divided over whether prices will drop sharply or simply stagnate
in a so-called soft landing scenario.
Prices in the closely watched Toronto-Oshawa region were up
0.1 percent on the month and a tame 1.4 percent on the year.
Vancouver, to which authorities also pay attention, fell 0.2
percent on the month and 1.3 percent on the year. The oil town
of Calgary was up 0.4 percent since October.
With prices stabilizing, economists expect new construction
to cool further in 2014. Starts for all of 2013 slowed to
188,200 units, down sharply from 215,000 in 2012 and the lowest
full-year tally since 2009, according to Robert Kavcic, senior
economist at BMO Capital Markets.
"In fact, outside of that recession year, it was the slowest
year for starts in more than a decade. We expect further cooling
to about 180,000 units this year, which would reflect balanced
overall building activity," Kavcic said in a research note.
Notably, starts for both houses and multi-units - typically
condos - fell in December. Condominium construction fueled
building in Canada's biggest cities, including Toronto and
Vancouver, during the height of the boom, but has since slowed
dramatically. Many observers fear a glut of condos coming to
market in 2014 and 2015 may drive prices lower, but are divided
over whether a correction would spread to the broader
residential housing market.
The outsized drop in November building permits was offset
slightly by an upward revision to October data to show an 8.0
percent gain in the month, according to Statistics Canada.
Residential construction intentions sank by 7.6 percent with
both single- and multi-family dwellings declining, while the
nonresidential sector dropped by 5.2 percent as institutional
and industrial building plans decreased.
Commercial building intentions, however, were once again
robust, with the value of permits hitting a record level over
the past 12 months, according to Kavcic.