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Building permits
September 2004

Highlights

Construction intentions for both housing and non-residential sectors fell in September, pushing down the total value of building permits for the third consecutive month.

Contractors took out $4.4 billion in building permits, down 3.3% from August. It was the first time since late 1997 that permits have fallen for three months in a row.

However, September’s total is still 4.3% higher than the average monthly level in 2003.

In the residential sector, intentions continued to cool in September, as housing permits were down 4.3% to $3.0 billion, also the third straight decline. A decrease in single-family dwellings from a record high in August was only partly offset by a rebound in multi-family permits.

In the non-residential sector, municipalities issued permits worth $1.5 billion, down 1.3% from August, led by a significant drop in institutional projects. This was the third consecutive monthly decline in non-residential permits, and the sixth so far this year.

On a year-to-date basis, permits totalled $40.8 billion between January and September, up 7.8% from the same nine-month period last year. This was entirely the result of the overwhelming demand for new dwellings since January.

Builders took out $27.2 billion in housing permits from January to September, up 16.3% from the same period in 2003. Permits in the non-residential sector fell 5.9% to $13.6 billion.

Among the metropolitan areas, the largest advances in dollars on a year-to-date basis occurred in Vancouver and Montreal, as a result of the feverish demand for new dwellings. Oshawa recorded the largest decline, with significant decreases in both residential and non-residential components.

Residential sector: Halt to growth in single-family dwellings

Contractors took out $1.95 billion in permits for single-family dwellings in September, down 9.8% from August’s record high of $2.16 billion. In contrast, the value of multi-family permits rose 8.5% to $1.0 billion.

Despite recent increases in mortgage rates and the sustained growth in housing prices, the demand for new homes remains strong. Mortgage rates are low from a historical standpoint, while consumer confidence is still high across the country. At the same time, full-time employment has risen significantly since the beginning of the year, and the number of immigrants to Canada has risen by nearly 40,000 persons over last year.

Housing permits fell 16.3% in Ontario, the biggest factor in the overall decline in the nation’s residential sector. Ontario’s decline occurred in permits for single-family dwellings. In contrast, the largest gain was recorded in British Columbia on the strength of intentions for multi-family dwellings.

On a year-to-date basis, municipalities issued $18.2 billion in single-family permits between January and September, up 12.8% from the same nine months in 2003. Intentions for multi-family dwellings surged 24.0% to $9.0 billion.

Since January, municipalities have approved 182,500 new dwelling units, the highest nine-month total since 1987 when 192,600 new units were authorized.

Gains on the cumulative value of residential permits were recorded in every province and territory, as well as in 23 out of the 28 census metropolitan areas.

Non-residential: Third consecutive monthly decline

Institutional permits fell 22.3% to $260 million, their lowest level since February 2000. This was largely the result of declines in the demand for education and medical buildings. Institutional intentions in Ontario plunged 32.2% to $108 million, the largest drop among the provinces.

Permits in the commercial sector showed continuing strength, holding steady at $892 million. Demand for commercial permits was particularly strong in Manitoba, where they rose 76.7% to $39 million, as intentions for laboratories and office buildings increased.

In the industrial component, intentions rose 24.1% to $308 million after two straight monthly decreases. In Quebec, permits for industrial projects surged 58.9% to $68 million, the biggest gain in dollar terms in the provinces, thanks to proposed projects in the plant category.

Continued strength in the commercial component could reflect retail sales, which advanced for a third consecutive month in July. It was the sixth monthly sales gain this year, following a period of successive declines in the last four months of 2003.

In the industrial area, manufacturers remain optimistic about the outlook for higher production and employment during the final three months of 2004, according to Statistics Canada’s latest Business Condition Survey. They were also satisfied with the current level of orders received.

Among the 28 metropolitan areas, non-residential permits fell in 17. Ottawa recorded the strongest decrease, mainly the result of a drop in the office building category. In contrast, the largest increase occurred in Kitchener, the result of a strong gain in the commercial component.

Provincially, the largest drop in September occurred in Ontario, where non-residential permits fell 6.2% to $633 million, led by declines in the commercial and institutional areas. The biggest gain occurred in Manitoba, where non-residential permits rose 71.3% to $62 million because of higher construction intentions in commercial and industrial projects.

Between January and September this year, the value of non-residential permits totalled $13.6 billion, down 5.9% from the same period of 2003. The institutional sector experienced the greatest loss, falling 22.1% from the same period last year to $3.7 billion.

Permits for industrial projects fell 14.6% to $2.4 billion, while intentions in the commercial sector were up 8.7% to $7.5 billion.

Among the provinces, on a year-to-date basis, the biggest loss in non-residential permits (in dollars) was in Ontario, where they fell 9.3% to $6.1 billion. This was mainly the result of lower industrial and institutional intentions.

Strong growth in industrial and commercial projects propelled British Columbia to the highest gain, a 6.4% increase to $1.6 billion.