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(CEP News) Ottawa - July will likely have seen a significant decline in building intentions, economists say. Although economists differ on the degree of the decline, they agree residential permits will be the weak spot.
"We're still expecting the weakness we've seen [in] the housing market to continue and be reflected in building permits," said Scotiabank economist Karen Cordes, who said her bank is looking for a decline of 1% in business and residential building permits combined. Cordes cautioned, however, that the more important signal in the volatile statistic is the direction permits take. She said Scotiabank anticipates that direction will be negative given recent declining or slowing trends in housing starts, new home prices and existing home sales. The consensus estimate by economists is for a 1% decline. HSBC economist Stewart Hall agreed the direction in the building permits will be down, but is looking for an even bigger decline. "In May, residential permits dropped by -6.6% led by a 16% decline in multi family dwelling permits. In June multi dwelling permits dropped -13.8% leading overall residential permits to a -4.4% decline based on dollar values. This has coincided with a wind down of a building boom in multi-family residents that took place in February and March of this year. Continued moderation is expected given the rather sluggish picture painted by the starts data," he wrote in a research note. Hall forecasts a 4.2% decline in permits overall. BMO deputy chief economist Doug Porter forecasts a 2% decline in building permits with weakness focused in residential activity. Although he said he has not made a separate forecast for building permits, Laurentian Bank economist Sebastian Lavoie agreed with the others that there would likely be a decline in building permits, and noted a number of factors are sapping the real estate market and shifting it from a tight seller's market to a more balanced market. "Builders are adjusting to the end of the 40-year amortization period and zero money down mortgages. Affordability is at its worst level since the early 1990s," he said. By Sean McKibobn,
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