Construction intentions slipped in September, but they were still at their third highest monthly level ever, thanks in part to another record high for building permits in Alberta.

Builders took out $5.7 billion worth of permits, down 2.5% from August. The decline occurred mostly in the residential sector, as intentions in the non-residential sector remained virtually unchanged.

September's total was just below the $5.8 billion worth of permits issued in August, which was the second highest level on record. The record high occurred in December 2005.

In the housing sector, municipalities issued $3.5 billion worth of permits in September, down 3.8% from August. Intentions fell in both single- and multi-family components.

In the non-residential sector, the value of permits slipped a marginal 0.3% to $2.2 billion. A loss in the commercial component offset gains in the institutional and industrial components.

Provincially, the value of building permits fell in six provinces, with the biggest declines in terms of dollars in Ontario and British Columbia. The value of permits in the three Prairie provinces and in Prince Edward Island advanced in September.

The largest gain (in dollars) occurred in Alberta, where municipalities approved $1.3 billion worth of permits in September, another record high. This was due to strong construction intentions in both the residential and non-residential sectors. After only nine months, Calgary has already set a record annual high for building permits.

Despite the declines in September, construction intentions in both sectors remained healthy. The value of residential permits increased 8.1% in the third quarter from the second quarter. In the non-residential sector, the value of permits was up 3.1%, the seventh increase in the past eight quarters.

Residential: Single- and multi-family permits both slip

Construction intentions for both single- and multi-family components declined in September, halting a series of monthly gains in each component.

The value of single-family permits totaled $2.3 billion, down 3.1% from August. This decrease followed three consecutive monthly increases. Permits for multi-family dwellings retreated 5.1% to $1.2 billion after two monthly gains.

The largest decline in the housing sector among provinces came largely from Ontario (-11.2% to $1.2 billion), in the wake of drops in both the single- and multi-family components. Gains in the three westernmost provinces and in Nova Scotia failed to offset the overall retreat.

However, the demand for both single- and multi-family units has been on an upward trend in recent months.

The housing sector continues to benefit from advantageous mortgage rates, an upward trend in full-time employment and strong consumer confidence. The big demand for housing in Western Canada has also been a major factor.

On a year-to-date basis, municipal authorities approved 175,350 new dwellings units between January and September, up 1.9% from the same nine-month period in 2005. Approvals for new single-family dwellings rose by 1.9% and new multi-family units by 1.8%.

Construction intentions strong, stable in non-residential sector

Although there has been little growth since May, the monthly value of non-residential permits has been strong (around $2.2 billion), except for July when the value declined to $1.9 billion.

In the industrial component, intentions rose 3.2% to $457 million, a fifth increase over the last six months. This was the result of gains in intentions for utility buildings in seven provinces. Prince Edward Island recorded the highest increase (in dollars), a record level for this component.

The value of industrial permits has been on an upward trend since January 2006.

Institutional intentions rose 23.7% in September to $641 million, a third consecutive monthly increase. Higher construction intentions for government administrative and medical buildings contributed to this gain. The value of institutional permits has been on an upward trend since April 2006.

Alberta had the strongest monthly increase in this component as the value of institutional permits hit $214 million, the third highest level on record. In contrast, Ontario posted the largest drop in dollars (-18.6% to $188 million), following a strong monthly gain in August.

In the commercial component, the value of building permits fell 11.6% to $1.1 billion in September, following a 12.4% gain the month before. A decline in the value of permits for office buildings in Alberta and Ontario was behind the drop. In both provinces, construction intentions for office buildings were very high in August.

Despite this decline, the commercial component has been on an upward trend since October 2005.

Several factors have served to maintain a fertile environment for non-residential construction intentions. These include strength in retail sales; lower vacancy rates for office buildings in the past few quarters; favourable interest rates; and record profits posted by large corporations.

In contrast, manufacturers are expecting tougher times ahead, according to the latest Business Conditions Survey.

Provincially, the biggest gain occurred in Alberta, where non-residential permits rose 14.9% to $570 million. In contrast, the largest drop (in dollars) in the non-residential sector occurred in British Columbia, where both commercial and institutional sectors recorded huge declines.

However, in British Columbia, for the first ninth months of 2006, the value of non-residential permits has increased 9.4% compared to the same period last year.

At the national level, the cumulative value of non-residential permits was up 9.5% from the first nine months of 2005.

Metropolitan areas: new annual record for Calgary

With three months of data in 2006 still to be compiled, the total value of building permits issued for Calgary ($4.0 billion) has already surpassed the previous annual record of $3.9 billion set in 2005. Strong gains in both residential and non-residential buildings led to this new mark. The cumulative value was 42.0% higher than the total for January-to-September 2005.

The second largest gain (in dollars) was recorded in Edmonton, where a huge demand for housing considerably boosted the overall value of permits (+26.4%).

Vancouver, Toronto and Winnipeg also showed important growth. In contrast, the largest declines have occurred in Ottawa and Hamilton, where both residential and non-residential permits are down.