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Building Permits

May 2007

64-001-XWE


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Analysis – May 2007

Construction sites in Western Canada will be humming this summer as the value of building permits, a leading indicator for construction activity, surged to its highest monthly level ever in May.

Municipalities issued a total of $6.8 billion worth of permits, up 21.4% from April and 8.5% higher than the previous high set in October 2006. More than 15% of the total value in May came from only 15 large projects.

The Calgary and Vancouver metropolitan areas were responsible for nearly 75% of the overall gain (in dollars) in May. Excluding these two areas, the total value of permits would have increased by only 7.0% instead of 21.4%.

Gains in these two metropolitan areas pushed the total value of permits in Alberta and British Columbia to record highs. There was also strong growth in Manitoba, Saskatchewan and New Brunswick, thanks largely to construction intentions in the non-residential sector.

Non-residential permits surpassed the $3-billion mark for the first time in the wake of a big increase in commercial projects. Contractors took out a record $3.1 billion in permits for proposed construction projects, up 55.7% from April. This level was 18.5% higher than the previous record of $2.6 billion set in January.

On the residential side, municipalities issued $3.7 billion in permits, a 2.4% increase from April. The value of single-family permits increased, while multi-family permits slipped marginally.

Non-residential sector: Strong demand for new commercial space

The commercial component accounted for the lion's share of gains in the non-residential sector in May. Contractors took out permits worth a record $2.1 billion, a 59.2% increase from April.

This was by far the largest monthly figure on record for the commercial component, surpassing the previous record high of $1.6 billion set in October 2006. Several large projects for new office space in the Calgary and Vancouver areas accounted for the increase.

The dynamic commercial component (the largest of the three non-residential components) has been on an upward trend since October 2005. Furthermore, the average monthly value of commercial permits issued since the beginning of 2007 was 21.2% higher than in 2006.

In the institutional component, permits rebounded in May from a 26-month low in April. The value of institutional projects increased 76.6% to $616 million, the second highest level so far in 2007. Only the level in January was higher than the one reached in May.

Note to readers

Unless otherwise stated, this release presents seasonally adjusted data, which ease comparisons by removing the effects of seasonal variations.

The Building Permits Survey covers 2,380 municipalities representing 95% of the population. It provides an early indication of building activity. The communities representing the other 5% of the population are very small, and their levels of building activity have little impact on the total.

The value of planned construction activities shown in this release excludes engineering projects (e.g., waterworks, sewers or culverts) and land.

For the purpose of the Building Permits release, the census metropolitan area of Ottawa–Gatineau is divided into two areas: Ottawa–Gatineau (Quebec part) and Ottawa–Gatineau (Ontario part).

School projects were the main factor behind the gain. Only two provinces – Newfoundland and Labrador and Alberta – recorded a decline in this component. The largest gains (in dollars) were in Ontario and British Columbia.

On the industrial side, the value of permits surged 21.3% in May to $419 million after a 19.4% decline in April. While eight provinces showed a gain in May, the increase was due mainly to construction projects for manufacturing plants in Ontario.

The value of industrial permits has been on a downward trend since the end of 2006.

The buoyant construction intentions in the non-residential sector since the beginning of 2007 are consistent with low office vacancy rates in several large centres, high profits recorded by Canadian corporations and a vigorous retail sector.

Housing sector: Slight decline in the value of multi-family building permits

The value of multi-family permits edged down 0.6% to roughly $1.4 billion in May. After an impressive gain in April, the number of units approved by municipalities fell 18.3% to 9,359.

This came from a marked increase in the average value of multi-family permits.

Builders took out $2.3 billion in single-family permits, boosting their value by 4.3% over April to its highest level in four months. The number of approved units increased 2.8% to 9,481. Nevertheless, the increase failed to halt the downward trend in the number of single-family units that dates back to September 2006.

The demand for housing continues to remain strong owing to several factors, including strong employment, rises in disposable income, strong immigration and attractive financing options. Recent increases in mortgage rates and prices could, however, erode affordability.

The value of residential permits increased in seven provinces.

The strongest growth (in dollars) in the value of residential permits occurred in British Columbia, thanks mostly to a jump in multi-family permits. The value of housing permits hit $905 million, up 30.9% from April and the highest level on record for the province. Quebec also recorded a sizeable increase.

In contrast, the value of residential permits in Alberta fell 21.9% from a record level in April, resulting in the second weakest showing in 11 months for residential permits in the province.

Metropolitan areas: Calgary and Vancouver dominate the scene

Among the 34 metropolitan areas, 20 recorded gains in residential permits, while 26 saw the value of their non-residential permits rise.

The demand for office space in downtown Calgary led this census metropolitan area to record a 160.6% jump in May, surpassing the $1-billion mark for the first time. Of this total, $856 million in intentions were in non-residential permits, which was more than eight times the value in April.

While very small in comparison, other important gains in non-residential permits (in dollars) were recorded in Hamilton, Victoria and Winnipeg.

In the residential sector, Vancouver led the pack, with residential permit values increasing 54.9% to $585 million and total permit values reaching $803 million, up 38.0% over April.

Ottawa–Gatineau (Quebec part), Hamilton and Barrie saw appreciable gains (in dollars) in residential permit values, but were eclipsed by Vancouver's increase.

Chart 1 Total value of building permits
Chart 2 Residential value of building permits – Total
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