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A slowdown in the rate of housing construction in February led to grumblings that eroded affordability and mortgage stress testing were catching up with the new-home market, but a report from National Bank suggests condo builders are going to “bounce back.”

Economist Jocelyn Paquet acknowledges that the pace of Canadian homebuilding slowed down last month and that the country has been shedding construction jobs in recent months.

“Still, we expect multiple starts in Canada to bounce back to a level more in tune with the growing number of permits granted in this category in recent months and remain elevated due to demand for more affordable housing,” writes Paquet in National Bank’s latest Weekly Economic Watch.

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While homebuilders are facing hurdles — some in Vancouver appear poised to delay projects until the market firms up, for example — another indicator appears to support National Bank’s outlook for a rebound: building permits.

This paperwork, which is processed by municipalities throughout Canada, is required to move ahead with construction and so is seen to be a bellwether of future building activity.

The total value of residential permits (these cost applicants money) was up for both singles and multi-family dwellings in January, the latest month for which figures are available, according to Statistics Canada.

The value of permits for single-family homes was up 3.1 percent from December to $2 billion. Meantime, multi-family permits edged up 0.7 percent to a record high $3.3 billion. The overall value of multi-family permits has increased for five straight months.

On a year-over-year basis, combined residential permit values rose 1.3 percent, as the value of multi-family permits surged 23.6 percent, more than making up for the 23.6-percent hit to single-family permits.

That should come as welcome news for homebuyers after there was some speculation that the mortgage stress tests introduced last January would worsen the supply crunch that has plagued some of Canada’s major markets.

“Suppressed production of new housing will worsen the shortages that have developed,” one economist warned this month.

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