GTA housing demand surging

Those cranes on the Toronto skyline aren’t going to disappear anytime soon.

Building permits in Ontario were up by 15 per cent or a seasonally adjusted $2.17 billion in May, compared with $1.89 billion in April according to figures released Wednesday by Statistics Canada.

Much of that was because of the strong condominium market in the Toronto area, and intentions to build commercial projects. Residential permits rose 22 per cent to $683 million in Toronto, while non-residential projects which include commercial, industrial and institutional building, rose by 24 per cent to $488 million.

“Ontario rebounded from the recession with significant momentum,” said a report by Scotiabank also released Wednesday.

Building permits are considered a forward looking indicator of future economic activity. Developers who take out permits today will likely break ground in the following months, buying supplies and creating jobs.

While the province looked to be in relatively good shape, the bank said significant challenges still remained for the province, including a high Canadian dollar and a subdued economic recovery in the United States.

The bank said housing activity would likely slow in the second half of the year as high home prices alongside moderate income growth is expected to dampen affordability.

However, there hasn’t been much evidence of that in the Toronto market in the first half of the year.

Toronto existing home sales are up by 21 per cent in June from a year earlier, according to figures released Wednesday by the Toronto Real Estate Board.

The average price of a home in June was $476,371, up by 9.5 per cent from the same time a year ago.

“Housing demand is currently surging in the GTA but remains flat and relatively soft for all of Canada,” said housing analyst Will Dunning. “Economic confidence is in a weakening phase in much of the world, and this should rein-in expectations, hopefully reducing the frothiness, although not yet a bubble in the GTA.”

The Toronto board said this was the third best June on record for sales, behind 2007, which was the all time high, and second-place 2008.

“The pace of sales was a bit sluggish at the beginning of the year but rebounded in May and June,” said TREB president Richard Silver in a statement.

A strong June capped off a half year that wasn’t quite as strong as 2010 and down by 4.5 per cent, but solid by historical standards.

One problem, according to analysts, is that listings have been down. In June, active listings were down by 24 per cent compared with last year, creating a supply issue.

“While sales have been strong, we would be on track for a record number of transactions in 2011 if not for the decline in listings so far this year,” said Jason Mercer, the board’s senior manager of market analysis. “Tight supply meant more competition between home buyers and an accelerating annual rate of price growth in the second quarter.”