The value of building permits issued by municipalities declined for a second consecutive month in September, as construction intentions in the commercial sector hit their lowest level in almost four years. Builders took out $3.2 billion worth of permits, down 1.2% from August.

Despite the decline, this level was 4.4% above the average monthly level recorded in 2000.

The value of non-residential permits fell 3.0% to $1.4 billion in September following a 12.2% decline in August. Marked advances in industrial and institutional permits failed to offset a 17.6% reduction in the commercial sector.

The value of housing permits increased a marginal 0.2% to $1.8 billion, with multi-family dwellings solely contributing to the gain. This was the fourth monthly increase in the last five months in the residential sector.

On a year-to-date basis, municipalities issued a total of $30.0 billion in permits for the first nine months of 2001, up 9.2% from the same period in 2000. Both the residential and non-residential sectors contributed to this strong showing. The cumulative value of building permits hasn’t surpassed the $30-billion mark as early as September since 1989.

At a regional level, 18 of the 26 census metropolitan areas showed advances on a year-to-date basis. The largest growth (in dollars) occurred in the Montreal area where projects for office buildings largely contributed to the advance. The value of permits in the Vancouver area also rose substantially, powered by strong construction intentions for multi-family dwellings.

Single- and multi-family permits moved in opposite directions

Permits for multi-family dwellings rose 4.6% to $493 million, while single-family dwelling construction intentions declined 1.4% to $1.3 billion.

A continuing decline in mortgage rates and a low stock of vacant dwellings have positive repercussions on the housing market. However, an element of uncertainty comes from a decline in the consumer confidence, as recorded by the Conference Board of Canada for the third quarter.

Provincially, western Canada accounted for September’s rise in housing permits, as all provinces east of Saskatchewan recorded declines. British Columbia (+9.1% to $223 million) recorded the largest increase (in dollars), due to a considerable rise in multi-family permits.

For the January-to-September period, the value of residential building permits totalled $16.4 billion, up 7.4% from the same period last year. Gains in both single- and multi-family permits led to this increase.

At the provincial level, the largest growth (in dollars) on a year-to-date basis occurred in Ontario (+4.9% to $8.0 billion) and Quebec (+12.7% to $2.7 billion). In contrast, Nova Scotia posted the largest retreat (-14.1% to $340 million).

Commercial component pushed down non-residential sector

September’s reduction in the value of non-residential permits came solely in the wake of declines in projects valued at less than $1 million.

Permits worth more than $1 million, which in general result from decisions taken several months before, remained stable. Consequently, any possible impact of the September 11 terrorist attacks in the United States on non-residential building permits may not yet be fully perceptible.

The value of commercial intentions plunged in September for a second consecutive month. Municipalities issued commercial building permits worth $581 million, down 17.6% from August. This was the lowest level since January 1998. Reductions in the value of projects in the trade and service category, and for office buildings, were responsible for this drop.

On the other hand, permits in the industrial component rose 12.7% to $332 million in the wake of an important gain in the transportation building category.

Following a sharp decline in August, the institutional component rebounded with a 10.4% gain to $468 million due to projects in the medical and hospital category. This increase was the sixth over the last seven months.

Fuelled mainly by retreats in institutional and commercial permits in the Toronto area, the largest decline in non-residential permits (in dollars) occurred in Ontario (-11.3% to $514 million). In contrast, the largest increase came from British Columbia (+43.3% to $215 million), largely due to projects in the medical and hospital category.

The downward trend in non-residential permits is consistent with certain signals in the economy. Vacancy rates for office buildings climbed, industries lowered their use of production capacity and the Conference Board’s business confidence index plunged in the third quarter. However, decreasing interest rates could have a positive impact on non-residential intentions.

Year-to-date: momentum strong in the non-residential sector

For the January-to-September period, the total value of non-residential building permits was $13.6 billion, up 11.3% from the same period last year and the best performance for any first-nine-month period since 1989. Most of the advance was related to a hefty 38.3% increase in the institutional component. The commercial component also contributed to the overall gain with an 8.6% advance, while the industrial component was behind last year’s level (-6.2%).

Among the provinces, the tremendous increase in commercial permits in the Montreal area led Quebec to the largest advance (in dollars) in the non-residential permits (+33.1% to $3.0 billion). Ontario came second (+6.1% to $5.5 billion) solely due to the growth in the institutional component.

On the other side, Manitoba posted the largest decline (-26.4% to $297 million) as the three non-residential components dropped.