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Canada's record-setting pace of construction intentions came to an abrupt halt in February

Canada's record-setting pace of construction intentions came to an abrupt halt in February

Canada's record-setting pace of construction intentions came to an abrupt halt in February, as the value of building permits plunged to its lowest level in a year.

Municipalities issued $4.9 billion in building permits in February, down 22.4% from the second highest level on record in January. The level was 12.0% below last year's monthly average, and the lowest since February 2006.



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February's decline, the fastest in 13 months, occurred due to across-the-board decreases in both residential and non-residential sectors. Intentions fell in all provinces except Manitoba; six registered double-digit percentage declines.

Prior to February, intentions have been strong in recent months, thanks mainly to soaring demand for residential and non-residential space in Western Canada.

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

In the non-residential sector, the value of permits fell 28.7% to $1.9 billion after a 19.9% gain in January that sent non-residential intentions to a record high. February's level was the lowest since April 2006, and 10.6% below the average for 2006. The industrial sector incurred the biggest decline.

In the residential sector, permit values declined 17.8% to $3.0 billion, the lowest since March 2005.

Housing sector: Sharp decline in multi-family units

Intentions in the housing sector cooled off in February due to a sharp decline in permits for multi-family dwellings.

The value of multi-family permits plunged 34.4% to $824 million. This was the lowest value in 13 months and the second lowest since December 2004. Municipalities approved only 7,120 multi-family units, down 27.4%, the lowest level in just over a year.

The value of single-family permits fell 9.0% to $2.2 billion, following a record high in January. This was the lowest level in eight months.

Municipalities approved 9,160 single-family units, down 7.3% from January, and 7.7% below the average for 2006.

The number of approved units in the residential sector has been on a slightly downward trend since August 2006. Prior to that, the trend had experienced almost uninterrupted growth since the beginning of 2005.

However, several factors could still prop up the demand for housing, including strong employment growth, increasing disposable income, high consumer confidence, immigration and inter-provincial migration, favourable mortgage rates and low apartment vacancy rates in various centres.

On the other hand, the price of new homes continued to increase strongly in Western Canada, and the inventory of unsold new housing has been on the rise since August 2006.

Provincially, Ontario incurred the biggest loss (in dollars) in the total value of residential permits, posting its lowest value since December 2001 at $1.0 billion.

Significant declines were also recorded in British Columbia, Alberta and Quebec. As in Ontario, the declines came from retreats in both the single- and multi-family components.

The value of residential permits rose in only three provinces, and these gains for the most part were modest. However, in Newfoundland and Labrador, the value of residential permits surged 36.7% to $35 million.

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Non-residential: Across the board decline halts half a year of strong growth

February's plunge in non-residential intentions came after several very strong months in the second part of 2006 and in January this year.

Non-residential intentions declined in every province except Manitoba. Most recorded double-digit declines. By far, the largest (in dollars) occurred in Ontario (-43.9% to $770 million), which set a record high in January with a 79.0% gain.

The biggest decline occurred in the industrial sector, where the value of permits plunged 53.3% to $308 million in February, the lowest level since April 2006. This followed a 48.2% gain in January. February's level was 18.4% below last year's monthly average.

Industrial intentions had been on an upward trend throughout last year. However, during the past three months, they have remained relatively flat.

The decline in the industrial sector has been largely caused by a retreat in construction intentions for plants in Ontario.

In the commercial component, the value of permits fell 20.2% to $1.1 billion, the lowest level since February 2006 and the third decline over the last four months. February's value was 11.0% below last year's monthly average. The decrease in this component came largely from lower construction intentions for office buildings.

The decline in commercial permits was spread among eight provinces, with the largest decreases (in dollars) in Alberta, Quebec and Ontario. In Alberta, the $187-million value of commercial permits was the lowest level since September 2005.

In contrast, British Columbia and Manitoba recorded monthly gains in commercial permits, fuelled largely by projects for trade and services buildings in both provinces.

In the institutional sector, the value of permits declined 20.7% to $498 million, following a 71.5% gain in January. This level was 4.3% lower than the monthly average for 2006, which was a banner year for institutional construction projects.

The main factors in the decrease in the institutional component were large declines in the medical buildings category in Ontario and Quebec and in intentions for schools in British Columbia. They were only partly offset by a strong gain in Alberta, where the value of permits for schools and medical buildings surged.

Despite February's showing, several factors could have a positive impact on non-residential construction intentions. These include recent strong growth in corporate operating profits, declining vacancy rates for office buildings, intentions among businesses and governments to increase their spending in non-residential construction in 2007, according to the latest Private and Public Investment Survey, and the continuing advantageous interest rates.

Metropolitan areas: Marked declines in Toronto and Vancouver

The value of permits in the 34 census metropolitan areas represented 70% of the total value of permits in February.

Among those 34 areas, 20 recorded declines in their value of building permits compared to January. In dollars, the largest losses occurred in Toronto and Vancouver.

In Vancouver, the decline came from both the residential and non-residential sectors. In Toronto, it was due to a marked decline in the demand for new dwellings.

In contrast, the largest gain (in dollars) came from Winnipeg, which had increases in both sectors.

Available on CANSIM: tables 026-0001 to 026-0008, 026-0010 and 026-0015.

Definitions, data sources and methods: survey number 2802.

The February 2007 issue of Building Permits (64-001-XWE, free) will be available soon.

The March building permit estimate will be released on May 7.

About the author

Québec Landlords Association (1)

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