The overall value of building permits increased, thanks to a strong surge in proposed commercial and institutional projects. However, construction intentions in Canada's housing sector fell in June for the second straight month.

In total, municipalities issued just over $3.8 billion in building permits, up 4.6% from May.

Builders took out $1.6 billion in non-residential building permits in June, the highest level in the last 11 months and a 19.1% jump from May.

In contrast, the value of building permits in the residential sector slid 3.5% to $2.3 billion, the second consecutive monthly decline, as plans for multi-family dwellings dropped significantly. Even so, the housing market has been so hot this year that the value of residential permits in June was still 24.0% higher than the average monthly level in 2001.

On a year-to-date basis, the total value of building permits for the first six months of 2002 reached $22.6 billion, a robust 14.2% advance from the first half of 2001. This was entirely the result of the overwhelming demand for new dwellings in 2002.

Builders took out almost $14.5 billion in housing permits from January to June, up 33.7% from the same period of 2001. However, permits in the non-residential sector fell 9.4% to $8.1 billion.

Among the metropolitan areas, the largest advances in dollars on a year-to-date basis occurred in Calgary, as a result of residential permits, and in St. Catharines-Niagara, as a result of commercial projects.

Residential sector: Second straight drop in multi-family permits

The value of multi-family permits dropped 14.2% to $575 million in June, the second consecutive monthly decline since the record level in April. Permits for single-family dwellings increased 0.7% to $1.7 billion.

Municipalities in Ontario issued residential building permits worth $1.0 billion, down from almost $1.2 billion in May. This decline was the largest in absolute dollars among the provinces and resulted from the substantial drop in multi-family permits. However, it was still the sixth consecutive month in which Ontario surpassed the $1-billion mark for housing permits, an unprecedented streak.

In contrast, housing permits in Alberta rose from $334 million in May to $359 million in June, the largest growth in dollars.

Despite June's decline, construction intentions in the housing sector remained high. Advantageous mortgage rates and their positive impact on affordability, a low stock of vacant dwellings and strong employment numbers all contributed to a feverish pace in housing construction intentions.

Marked increases in single-family (+37.6%) and multi-family (+24.2%) permits during the first six months of the year fuelled this growth. So far this year, 106,600 new dwellings units have been authorized, the highest level since 1989 for the period from January to June.

Growth on a year-to-date basis in the 10 provinces and in 27 of the 28 metropolitan areas shows that the strength in the housing sector was spread across all the country. The largest increases in dollars occurred in Ontario and Quebec.

Non-residential sector: Strong growth in commercial and institutional permits

The 19.1% gain in non-residential permits in June was fuelled by a strong demand in the commercial and institutional components. Industrial permits also contributed to the strong showing, but to a lesser extent.

Builders took out $800 million in permits for commercial projects, up 22.5% from May, the third monthly gain during the past four months. This returned permits to values set earlier in the year. Hotel and recreational projects in St. Catharines-Niagara were mainly responsible for this advance.

Institutional permits have recorded two solid months of growth. In June, they moved up 23.3% to $509 million, following a 54.1% surge in May. June's level was the highest monthly figure so far this year. Most of the upswing came from educational projects. Municipalities in Ontario issued $265 million in institutional permits, up from $219 million in May, the biggest increase (in dollar terms) among the provinces.

The industrial sector improved a slight 3.2% to $253 million, in the wake of large projects for utility buildings. The largest increase occurred in Ontario, whereas Quebec posted the biggest decline. Despite the rise, June's level was 15.5% lower than the average monthly level in 2001.

Low interest rates, combined with a recovery in corporate profits for the first quarter of 2002, may have a positive impact on the non-residential sector. However, this impact could be offset by increasing vacancy rates for both office and industrial buildings in several major centres.

On a provincial scale, Ontario had the strongest increase, rising from $601 million in May to $736 million in June. Following a large project in May, Nunavut recorded the largest decline. Eight of the ten provinces showed increases.

Two consecutive increases in May and June were not sufficient to bring up the year-to-date value to what it was a year ago: there is still a 9.4% gap with the level for the first six months of 2001. Cumulative results between January and June were down 14.6% to $1.6 billion in the industrial component, and down 13.4% to $4.2 billion in the commercial component.

Institutional building permits for the first six months of 2002 reached $2.4 billion, up 3.4% from the same period of 2001. This result is consistent with the latest data on private and public investment intentions, which showed that capital spending by governments was expected to increase 20.5% this year.

Ontario municipalities issued $3.6 billion in non-residential permits during the first six months (+1.1%) to record the highest increase in dollars.