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Building permits
May 2004

Highlights

The value of building permits retreated 9.5% in May to $4.1 billion as construction intentions declined in both residential and non-residential sectors. After an exceptional month in April, the level recorded in May was the lowest in the past 9 months.

Builders took out permits worth $2.7 billion for housing in May, down 12.7% from April. This decline came on the heels of April’s $3.1 billion record high and still left May’s total 2.4% above the average monthly level in 2003, a banner year. A marked retreat in the multi-family component largely explained the decline.

In the non-residential sector, construction intentions fell 2.4% to $1.4 billion as the increase in the industrial component was more than offset by the declines in the commercial and institutional permits. The non-residential sector has been on a downward trend since July 2003.

So far this year, municipalities have issued a total of $21.7 billion in building permits, up 6.4% from the same period in 2003. This advance came from the sustained demand for new dwellings since the beginning of the year. The cumulative value for housing permits totalled $14.5 billion, a 16.9% growth from the same period in 2003. In contrast, the non-residential permits declined 10.2% to $7.1 billion.

Regionally, Montreal and Vancouver recorded by far the largest advance (in dollars) in the cumulative value of permits. In both areas, the strong demand for new dwellings drove the figures up. Nearly 21,000 new dwelling units have been approved in these two metropolitan areas alone. In contrast, Toronto and Hamilton recorded the largest retreats from last year due to the important declines in the institutional and industrial components.

Sharp decline in multi-family permits

Municipalities issued $781 million in permits for multi-family dwellings in May, a 30.0% drop from April’s record high, and the lowest level since April 2003. The value of single family dwellings declined 3.1% to $1.9 billion, the fourth monthly decline since the beginning of the year.

May’s decline came in large part from Ontario, where the value of housing permits fell 27.9% to $1.0 billion in May from a record $1.4 billion in April. In contrast, Alberta posted the largest gains, due to single-family permits.

Despite the retreat in the value of residential permits in May, the level remained relatively high. Since the beginning of 2004, the housing sector has been positively affected by the strong growth in full-time employment and by the low mortgage rates.

The strength in the housing sector had a positive impact on other sectors. Sales in building and outdoor home supplies stores remained at record high levels. Continued strong demand in the construction sector and soaring prices were the forces behind record high shipments of wood products in April. Also, in May, gains in the employment in the construction sector totalled 52,000 persons from a year ago.

For the January-to-May period, 97,900 new dwelling units have been approved by municipal authorities, 10,325 more than the same period last year.

The value of single-family permits was up 12.0% to $9.8 billion while the value of multi-family permits totalled $4.7 billion, a 28.6% gain from last year.

All provinces and territories showed marked advances in residential permits on a year-to-date basis.

Non-Residential projects give up ground

Declines in the non-residential sector were lead by a 15.2% slide in the value of institutional permits to $394 million. This pegs the level nearly $95 million short of last year’s monthly average.

The inability of new spending intentions to keep last months approvals pace for social services buildings and educational projects precipitated the drop. Ontario’s shedding of 47.4% from last month to $132 million, lead the decliners.

The commercial sector gave up some of last month’s growth, slipping 3.9% to $724 million. This is 6.9% lower than the monthly average set last year and comes as the value of permits for this category fell particularly hard in Alberta and Nova Scotia. The value of recreational permits staged a retreat in both provinces and was compounded by a drop in trade and service building permit values in Alberta.

Industrial building permits rebounded 30.6% from last month to $279 million. April had seen permit values hit a monthly low not seen since March of 2002. Factory and utility and transportation sector permits in Ontario catalyzed the advances. In spite of the gains in the value of industrial permits issued, the sector in 2004 lags 17.9% behind last years record setting pace.

In the commercial sector; despite the monthly decline, the value of projects approved in 2004 remains relatively high. This is consistent with the upward trend in retail sales since the fall of 2001 and a declining office vacancy rate nationally. Meanwhile, the latest business conditions survey revealed manufacturers to be guarded in their outlook for the second quarter of 2004 despite a number of positive trends. In the industrial sector capacity utilization which climbed to 83.5% in the first quarter still remains below the most recent high of 85.4% reached in the final quarter of 1999.

Provincially, five of the provinces staged retreats with Alberta seeing the greatest decline, shedding 21.8%% to $207 million, while Ontario sloughed off 8.3% to $577 million. These were backstopped by gains in Quebec, the Yukon and British Columbia.

On a year-to-date basis, municipalities have issued $7.1 billion in non-residential building permits, down 10.2% from the first five months of last year.

All three components have failed to match last year’s pace. But the commercial sector is down only 1.7% to $3.8 billion on a cumulative basis. The institutional sector is down 19.0% while the industrial sector is off 17.9%