Contractors took out their highest level of building permits on record in August as investment intentions by governments and businesses went through the roof.

Municipalities issued a record $5.4 billion in building permits, a 10.2% increase from July. It broke the previous monthly record of $5.3 billion set in June 2004.

Chart 1
Total value of building permits

The value of permits for non-residential projects surged 32.0% to just over $2.25 billion, which was also a record. The level was fractionally higher than the previous mark set in March this year.

Gains in all three non-residential sectors (industrial, commercial and institutional) surpassed 30% in August. The growth was fuelled by strong non-residential investment intentions in Ontario.

In the residential sector, construction intentions edged down 1.4% to $3.2 billion, the first decrease in five months. The slip was due to a decline in intentions for multi-family dwellings.

However, the monthly total for housing was still 2.9% higher than the average in 2004, which was a record year.

The total value of building permits has been on an upward trend since the beginning of 2004, thanks to constant strength in the residential sector and the surge in non-residential construction intentions.

Massive investment in British Columbia and Alberta

On a year-to-date basis, municipalities issued building permits totalling $40.0 billion during the first eight months of 2005, up 10.4% from the same period last year.

Construction intentions in the non-residential sector were up 24.0%, more than six times the pace of growth in the value of housing permits.

The biggest factor in the phenomenal growth of building permits so far this year has been construction fever in Alberta and British Columbia. Combined, they have accounted for 87.0% of the year-to-date increase from 2004.

Excluding Alberta and British Columbia, the overall value of building permits for the first eight months of 2005 would have been only 1.9% higher than in the same period last year, instead of 10.4%.

So far this year in Alberta, industrial construction intentions have nearly tripled, while the value of institutional permits almost doubled. In British Columbia, the institutional construction intentions have far more than doubled.

Year-to-date gains (in dollars) in building permits in Calgary, Edmonton and Vancouver have surpassed increases in all other census metropolitan areas.

In Calgary and Edmonton, the strength came from both housing and non-residential permits. In Vancouver, the non-residential sector fuelled the gain.

Residential sector: Fourth gain in five months in single-family permits

Contractors took out single-family permits totalling $2.1 billion in August, up 0.2% from July, which was the fourth gain in the last five months. In contrast, the value of multi-family permits dropped for a second consecutive month, falling 4.4% to $1.1 billion.

Advantageous mortgage rates and their positive impact on affordability, and the progression of full-time employment, were key factors behind the demand for housing. However, the Conference Board's consumer confidence index, which remained high throughout the year, declined in August.

Provincially, the largest gain in August (in dollars) occurred in British Columbia as the result of increases in both single- and multi-family construction intentions. The value of single-family permits in British Columbia hit a record high of $311 million in August. The value of multi-family permits reached its highest level since June 2004.

In Alberta, the value of residential permits reached its second highest value on record, just below last April's level.

In contrast, Ontario and Quebec posted the largest retreats. In Ontario, municipalities issued housing permits worth $1.1 billion, the lowest level since November 2004.

The value of single-family permits for the first eight months of 2005 was only 0.6% higher than the same period in 2004. For multi-family dwellings, the growth totalled 10.1%.

From January to August, 48.4% of the 156,220 new units approved have been multi-family. This proportion has been steadily rising since 2000 when their share was 38.6%.

Non-residential: Strength across the board

August's record high $2.3 billion in non-residential building permits marked the second time this year that the total has surpassed the $2-billion mark.

A record value in the institutional component combined with high levels in the industrial and commercial components pushed non-residential permits above the previous record.

In the institutional sector, the value of permits rose 34.1% to $754 million. Demand for institutional permits was particularly strong in Ontario, where they more than doubled to $478 million, as intentions for medical buildings increased. This component has been on an upward trend since September 2004.

In the industrial component, intentions rose 31.4% to $442 million after a 16.8% decline in July. In Ontario, permits for industrial projects surged 50.8% to $189 million, the biggest gain in dollar terms among the provinces, thanks to proposed projects in plants and utility buildings categories.

Chart 2
Residential value of building permits - Total

In the commercial sector, the value of permits rebounded 30.8% to $1.1 billion following a 21.6% decline in July. The strength came mostly from Ontario and Quebec where every category of commercial buildings showed gains, with the exception of buildings for trade and services in Ontario.

The excellent results for the non-residential sector are consistent with economic indicators. Capacity use by industries edged up to its highest level in nearly five years during the second quarter. Total retail sales reached a new high in July, corporate profits have risen in 12 of the past 14 quarters and office vacancy rates fell in almost all major markets during the last quarter.

Of the 28 census metropolitan areas, 19 recorded monthly increases in the value of non-residential permits in August. The largest gain occurred in the census metropolitan area of Ottawa, and the largest drop was in Edmonton.

On a year-to-date basis, municipalities issued $14.9 billion worth of non-residential permits, up 24.0% from the January-to-August period in 2004. Last year, it took 10 months to reach this same level.

All three components increased. The value of commercial permits recorded a 22.2% gain. The value of permits increased 23.5% in the institutional component and the industrial sector showed a year-to-date advance of 30.7%.

So far this year, non-residential permits have increased in every province except Quebec. The largest increases were recorded in Alberta and British Columbia. Marked advances occurred in every non-residential component in both provinces.

Chart 3
Number of dwelling units - Single and multiple

Chart 4
Non residential value of building permits - Total

Chart 5
Commercial value of building permits

Chart 6
Industrial value of building permits

Chart 7
Institutional and governmental value of building permits