Canadian building permits drop

Paul sent in this link to an article in the Globe and Mail about Decembers unexpected drop in building permits across Canada. Economists had been expecting a drop of about 2 percent, but permits actually pulled back 7.8 percent.

Most experts expect construction activity to ease from last year’s 2006 blistering pace amid higher mortgage costs, though overall activity is expected to remain strong.

“The data is in line with our view that the residential sector is likely to continue to cool…although only modestly in 2007,” wrote Dawn Desjardins, senior economist at Royal Bank of Canada, adding that “non-residential investment will continue at a solid clip backed by firm corporate balance sheets and decent profits.”

The article points out that last year saw a huge number of permits in western canada, so it will be interesting to see what happens when the record number of projects under construction complete in the next year or two.

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Watch what they do, not what they say.So builders are going to cut back on supply? Which way does the supply curve slope? How do the builders see future prices going?

el bbub

Hmm.. I wonder how it will affect construction workers.Also if there's still a great demand for land from developers would they fight over it or will some of the developers be squeezed out of the market too. Will the land get more expensive and more peaople wont be able to buy.

the pope

I'm curious about the quote from the Royal Bank economist. Has a bank economist ever predicted any of the previous RE corrections? To a certain extent it would be irresponsible for them to do so even if they had data showing that it was likely. Negative commentary from the major banks could have a bad effect on the market as a whole, and some would blame them for causing a house price crash.