The value of building permits fell for a second straight month in September, as construction intentions retreated in both residential and non-residential sectors. Builders took out $3.7 billion worth of permits down 6.9% from August.

The value of housing permits declined 4.4% to $2.4 billion, the result of a sharp drop in construction intentions for multi-family dwellings. Despite this decline, housing construction intentions remained strong. September's level was virtually the same as the monthly average since the beginning of 2002, making it an exceptional year so far.

The non-residential sector decreased a significant 11.3% to $1.3 billion, also for the second straight month. All three components - commercial, industrial and institutional - recorded marked declines.

On a year-to-date basis, the total value of building permits reached $34.4 billion for the first nine months of 2002, up 16.4% over the same period in 2001. This strong performance is the result of feverish demand for new housing since the beginning of the year. Residential permits have soared 35.2%, while the cumulative value of non-residential permits was 6.5% behind the level at the same period in 2001.

In nine months this year, 161,700 new dwelling units have been authorized, which is higher than the annual total for each year between 1993 and 2000. It is also within 2,100 units of the total for the entire year of 2001.

Regionally, the largest gains (in dollars) on a year-to-date basis occurred in the census metropolitan areas of Toronto, Montreal and Calgary. Growth in these three came from the phenomenal demand for new housing, particularly single-family units.

Value of single-family permits remained high

The value of single-family permits reached $1.8 billion, up 1.0% from August, a second consecutive monthly increase. In contrast, the value of multi-family permits dropped sharply from the high level in August. Construction intentions for multi-family dwellings totalled $674 million, down 16.1% from August.

September's decline in residential sector came largely from Ontario, where the value of permits fell 13.7% to $1.0 billion due to a substantial decline in multi-family permits. In contrast, British Columbia posted the largest increase (in dollars) due to gains in both single- and multi-family components, the second double-digit increase in a row.

On a year-to-date basis, the residential sector was extremely healthy between January and September. Permits for multi-family dwellings increased 35.9%, while those for single-family dwellings rose 34.9%. Most of the gains came from permits for new dwellings, as they accounted for 90% of the value of residential permits issued since the beginning of the year.

The buoyant performance in housing this year is linked to low mortgage rates and strong job growth, as well as the low stock of dwellings available for rent or re-sale. Positive effects related to the strong demand for new housing followed. Thus, furniture stores sales are at historically high levels and construction employment has increased.

Provincially, the strongest growth in the cumulative figures (in dollars) occurred in Ontario (+26.2%) and Quebec (+53.1%). All provinces, territories and census metropolitan areas have recorded advances so far this year, showing that the housing fever is a national phenomenon.

Second monthly decrease in non-residential sector

The value of non-residential intentions in September fell 11.3% from August to $1.3 billion. This decrease was the largest in dollar terms since March 2001. All three non-residential components fell.

Institutional intentions tumbled 13.7% to $400 million, the second marked decrease in a row. Except for religions building and social homes, all categories of institutional buildings declined, especially educational buildings.

The commercial building component fell 7.0% to $638 million, the third straight monthly decline. The trade and services category showed the most significant loss after a substantial increase in August.

The value of the industrial component dipped 17.8% to $237 million, pushed down by a large decline in the manufacturing plants category. It was the second monthly decrease in a row.

Rising vacancy rates for both office and industrial buildings in several major centres may have hurt the non-residential sector. However, good retail trade and the recovery of operating profits could have a positive impact.

Half of the 28 census metropolitan areas recorded monthly decreases in the value of non-residential permits. By far, the largest decline occurred in Toronto, where intentions fell in the trade and services and warehouse categories. However, this occurred following relatively high commercial levels in August. In contrast, Victoria recorded the highest increase due to large projects in the restaurant category.

Among the provinces, the most significant monthly decline occurred in Ontario, where intentions fell 31.2% to $486 million. It was the third monthly decline in Ontario as intentions fell in eight out of the province's 11 census metropolitan areas. In contrast, Alberta posted the largest growth (+25.1% to $242 million) with an increase in all three components.

In the first nine months of 2002, non-residential building intentions reached $12.4 billion, down 6.5% compared to the same period in 2001, the result of a decline in industrial and commercial intentions. Commercial building intentions saw the strongest decline (-9.7% to $6.3 billion), while permits for industrial intentions fell 11.0% to $2.4 billion. Only institutional permits recorded an increase (+2.8% to $3.8 billion).

Among the provinces, British Columbia recorded the largest year-to-date decrease (-26.0% to $1.3 billion), the result of a decline in educational building and medical and hospital categories. Despite a third consecutive monthly decrease, the strongest increase was recorded in Ontario (+3.1% to $5.6 billion), led by an increase in social homes and medical hospital categories.