Construction intentions remained strong in February despite declines in the value of building permits for both residential and non-residential sectors.
Municipalities issued a total of $3.9 billion in building permits, down 9.8% from a record high in January.

Builders took out permits worth $2.4 billion for housing in February, a 14.2% decrease from the previous month. But again the decline came on the heels of a record high in January, and February’s total remained just 1.4% short of the average monthly level in 2002, which was an exceptional year.

In the non-residential sector, construction intentions fell 1.9% to $1.5 billion. However, they were still 7.0% higher than the average monthly level in 2002. A sharp drop in commercial permits more than offset gains in the institutional and industrial components.

So far this year, municipalities have issued a total of $8.2 billion in building permits, up 10.4% from the same two-month period in 2002. It was the best showing ever for the first two months of any year, as both residential and non-residential permits were well above last year’s cumulative levels. In the coming months, as these intensions materialize the construction sector will remain healthy.

Regionally, the census metropolitan areas of Toronto and Calgary started 2003 strongly. In both areas, growth came largely from non-residential construction intentions.

Residential: Drop in both single- and multi-family permits

Construction intentions fell for both single- and multi-family dwellings in February.

The value of multi-family permits declined 33.6% from January to $562 million, their lowest level over the last 12 months. This drop followed a 23.1% increase in January.

Builders also took out fewer single-family permits, which fell 5.6% to $1.8 billion. However, putting this decline into perspective, single-family permits were also at a record high in January.

The demand for new housing remained strong, sustained by an upward trend in employment, advantageous mortgage rates, rising incomes and a low inventory of available existing housing. However, over the longer term, a low level of consumer confidence noted in February by the Conference Board of Canada could lead to less marked growth in the residential sector.

Provincially, the largest retreat in the value of housing permits occurred in Ontario (-15.3% to $1.0 billion) and Quebec (-17.5% to $494 million). The declines followed strong gains in January, 22.1% in Ontario and 46.9% in Quebec. Decreases were recorded for both single- and multi-family permits.

On a year-to-date basis, the value of residential permits reached $5.2 billion, up 10.7% from the same two-month period in 2002. The growth came from both single-family (+5.6%) and multi-family (+27.2%) permits. Since the beginning of the year, municipalities have authorized 36,841 new dwelling units, up 5.9% from the first two months of 2002 and the best start since 1990.

The largest gain among the provinces (in dollars) in the cumulative value of residential permits occurred in Quebec (+29.4%) and Ontario (+6.0%). In Quebec, the growth came from both single- and multi-family dwellings; in Ontario, the main factor was a strong demand for new apartments.

Non-residential sector: Large decline in commercial intentions

February’s 1.9% decrease in the value of building permits for the non-residential sector followed a 10.2% advance in January.

Gains in the industrial and institutional components failed to offset a strong decline in commercial intentions. However, the cumulative value of non-residential permits for the first two months of 2003 was 9.9% higher than during the same period last year.

The value of commercial permits fell 31.1% in February to $632 million, following a 56.8% jump in January. The most significant reductions occurred in proposals for hotels and restaurants and office buildings, as well as trade and services buildings. Ontario showed the largest decrease (-39.1% to $233 million) following a strong month.

After declining in January, construction intentions for industrial projects rose 31.5% to $350 million in February due to a large increase in the manufacturing building category. Ontario posted the most significant increase (+96.0% to $246 million).

Rising vacancy rates for both office and industrial buildings in several major centres could have a negative impact on the non-residential sector as a whole. Furthermore, industrial capacity use declined marginally during the fourth quarter of 2002. Industries operated at 82.9% of capacity in the last three months of 2002, down 0.2 percentage points from the third quarter. It was the first decline in the rate since the fourth quarter of 2001.

Following two sharp monthly decreases, the institutional component rebounded with a 48.0% gain to $528 million due to projects in the medical and hospital category. Ontario recorded the most significant increase (+53.0% to $343 million).

Fourteen census metropolitan areas recorded monthly declines in the value of non-residential permits. The largest drop occurred in the census metropolitan area of Vancouver, and the largest gain in Oshawa.

Provincially, the largest decline in the non-residential permits (in dollars) occurred in British Columbia (-44.6% to $108 million), driven mainly by retreats in commercial permits in Vancouver. In contrast, the largest increase was in Ontario (+12.3% to $821 million), mainly because of projects in the medical, hospital and manufacturing building categories.

The total value of non-residential building permits to the end of February was $3.0 billion, up 9.9% from the same two-month period last year. Most of the advance was related to a 13.1% gain in the industrial component and a 12.0% increase in commercial. The year-to-date level of permits in the institutional component advanced 4.3%.

The largest gain was in Ontario (+23.7% to $1.6 billion) where all three components showed increases. Non-residential permits fell sharply in Quebec (-20.6% to $516 million), again because of declines in all three.