In March, the value of building permits issued across Canada declined 4.4% to $3.6 billion, after falling 11.7% in February.

In spite of this, the storm of permits issued in January has left the sector buoyant and off to a record start with first quarter construction intensions amounting to $11.8 billion.

However, January’s record level of $4.3 billion in building permits was more than enough to push construction intentions to the first-quarter record. The level for the first three months was up 6.6% from the first quarter last year and 18.1% from the same period 2001.

Municipalities issued $2.4 billion in residential permits in March, a 3.1% increase from February. The value of non-residential permits declined 15.9% to $1.3 billion, their lowest level in 11 months, mainly due to a drop in institutional construction intensions.

Nationally, construction hotspots included the census metropolitan areas of Calgary and Toronto, where a buoyant demand for commercial space has been the driving factor behind the growth in permit values during the first three months of the year. In contrast, the biggest first-quarter decline occurred in Thunder Bay, where building permits fell by $54 million as a result of declining investment in institutional structures.

Continued favourable investment intensions in the construction sector are a positive sign for the Canadian economy in the coming months. Investments in construction tend to propel purchases in many areas of the domestic economy.

Residential: Single-family permits slide for second straight month

Builders took out $680 million worth of permits for multi-family dwellings in March, a 26.6% increase from their 14-month low in February. More than $400 million of that value, or 60.3%, was attributable to permits for apartments.

On the other hand, demand for single-family dwellings slipped 4.0% to $1.7 billion, the second straight monthly decline and the lowest monthly level since July 2002.

Even so, permits for single-family dwellings set a first-quarter record of nearly $5.4 billion, a 1.9% increase from the same period last year, in the wake of extremely strong levels in January. For multi-family permits, the first-quarter level reached $2.1 billion, up 21.4%.

Overall, between January and March this year municipalities issued $7.5 billion in residential permits, also a record.

January’s high levels were likely precipitated by a rush among potential homeowners to lock in mortgages before interest rates rose. While the torrid demand for residential dwellings has cooled somewhat from the first of the year, the sector remains healthy. Canadians have enjoyed sustained employment growth, particularly in full-time jobs. Demographic trends coupled with strength in earnings, low rental vacancy levels and reasonable mortgage rates have led to a wave of Canadians opting for home ownership.

On a provincial basis, the biggest monthly gain in terms of dollar value for residential permits occurred in British Columbia (+48.7% to $437 million), primarily the result of proposed apartment construction. It was followed by Ontario (+3.0% to $994 million), where a gain in single family units more than offset a decline in the multi-family domain.

The biggest decline was in Quebec (-9.0% to $462 million) where a small gain in multi-family permits could not offset a slump in single-family permits.

Non-residential: Only gains in commercial component

In March, the value of non-residential intensions fell 15.9% from February to $1.3 billion.

The commercial component was the only one to show an increase in the level of permits in March. Permits for commercial projects reached $685 million, up 7.8%, driven mainly by the hotel and restaurant and laboratory categories.

Institutional intentions plunged 43.7% to $296 million in March, the lowest level since April 2002. The medical category was the largest contributor to this decline, after a high level in February. Ontario recorded the largest decrease in dollars terms for this component (-45.2% to $185 million).

Intentions for industrial construction declined 17.4% to $289 million, with manufacturing buildings showing the biggest drop. Ontario recorded the largest decrease (-38.1% to $148 million), due to decline in manufacturing projects.

Regionally, 15 census metropolitan areas recorded monthly declines in the value of non-residential permits, the two largest occurring in Toronto and Hamilton.

Among the provinces, decreases in the industrial and institutional components led Ontario to the largest drop in March in the non-residential sector (-30.0% to $564 million). In contrast, a large gain in the industrial component led Nova Scotia to March's strongest increase (+130.9% to $42 million).

The non-residential sector has seen mixed signals from both businesses and consumers. Retail trade was up for a third consecutive month in February. Conversely, in the fourth quarter of 2002, industries lowered their use of production capacity. Also, increasing vacancy rates in the office building across the main census metropolitan areas could have hurt the non-residential sector.

In addition, although opinions on production prospects improved slightly, the mood among manufacturers, as measured by Statistics Canada’s Business Conditions Survey, continued to be guarded. Producers indicated some lower satisfaction with the levels of new and unfilled orders for the first quarter.

For the first quarter, municipalities issued $4.3 billion in permits for the non-residential sector, up 6.6% from the same period of 2002. Most of the gain was related to increases in the commercial (+7.9%) and industrial (+24.1%) components. The institutional component recorded a 5.8% decline.

Among the provinces, the largest first-quarter decline in the non-residential sector was in Quebec (-10.2% to $804 million), mainly due to the result of the lower commercial and institutional construction intentions.

On the other hand, fuelled by a surge in the industrial component in the Oshawa area by the industrial and commercial components in the Toronto area, the strongest gain occurred in Ontario (+11.9% to $2.1 billion).