Construction intentions cooled down in July

Construction intentions cooled down in July as the value of building permits declined, halting two months of record-setting performances. Municipalities issued building permits worth $6.2 billion, down 11.3% from $6.9 billion in June.

Still, July was one of only a handful of months in which permits exceeded the $6-billion mark.

At $6.9 billion in both May and June, the total value of permits was at its highest level on record.

Losses occurred in both the residential and non-residential sectors. The value of residential permits fell 6.3% to $3.8 billion, with declines in both the single-family and multiple-family components.

Contractors took out $2.3 billion in permits in the non-residential sector, down 18.6%. The value of institutional and commercial permits decreased, while industrial permits rose to their second-highest value in just over a year.

The value of permits increased in only three provinces: Newfoundland and Labrador, Prince Edward Island and New Brunswick.

Housing sector: Multi-family permits recede

Intentions in both components of the housing sector eased down in July.

Municipalities issued $2.4 billion worth of single-family permits, a 3.1% decline from June. Still, it was the third-highest value on record. A total of 9,553 single-family units were approved, a 2.4% decline.

The value of multi-family permits tumbled 11.1% to $1.5 billion, the first decline in five months. Municipalities approved 11,041 multi-family units, a 5.8% decline. Even so, the demand for new multi-family dwellings has been on an upward trend since the beginning of the year.

The high price tag associated with the purchase of single-family dwellings has contributed to an increasing shift in housing demand towards multi-family units. So far this year, 51.4% of the new units approved have been multi-family dwellings. The last time such a high proportion was observed for a whole year was in 1982.

Strength in employment, growth in disposable income, tight apartment vacancy rates in several centres and attractive financing options continued to have a positive impact on housing demand.

Residential permits declined in four provinces. The significant drops in Alberta, British Columbia and Ontario more than offset modest increases in permit values elsewhere.

The largest decline (in dollars) occurred in Alberta, where the value of permits fell 15.3% to $827 million, the result of decreases in both single- and multi-family permits. Despite the decline, Alberta's level was still 8.0% above its average value of residential permits for the first six months of 2007.

The drops in total residential permit values in British Columbia (-11.3% to $718 million) and Ontario (-5.8% to $1.2 billion) were mainly precipitated by falling levels of multi-family permits.

On the other hand, strength in the multi-family component led to increases in the total values of residential permits in Quebec (+4.2% to $718 million) and Nova Scotia (+29.6% to $75 million).

Ontario's decline in multi-family permits was largely the result of a decrease in the average value of such units approved.

Non-residential sector: Decline halts two strong months

Contractors took out $2.3 billion in non-residential permits in July, an 18.6% decline. This followed two very strong months, as non-residential permits totalled $3.1 billion in May and $2.8 billion in June.

Despite the decline, July's level was still nearly 10% above the average monthly level in 2006. Furthermore, the value of non-residential permits has been generally on an upward trend since the beginning of 2006.

In the commercial component, the value of permits totalled $1.2 billon, down 29.4% from June. Lower construction intentions were spread across a wide variety of buildings, such as office buildings, hotels, warehouses, shopping malls and retail stores. Intentions fell in seven provinces.

July's level was the lowest in five months. Despite the decline, the value of commercial permits has been on an upward trend since October 2005.

In the institutional sector, the value of permits dropped 16.9% to $592 million following gains of 14.6% in June and 78.6% in May. Lower construction intentions in educational buildings and nursing homes contributed to this decline.

Overall, seven provinces and two territories recorded declines. However, Ontario and British Columbia registered the most significant drops (in dollars), offsetting a strong gain in Alberta.

In the industrial component, the value of permits jumped 23.8% to $503 million, after a 6.6% drop in June.

The gain was based mainly on strong construction intentions for manufacturing buildings in Ontario and Alberta. In contrast, after five consecutive monthly increases, Quebec recorded the largest decline as a result of lower construction intentions in the utility and manufacturing building categories.

Several factors are consistent with the strength in the non-residential sector in recent months. These include strength in the retail and wholesale sectors, high corporate profits, and declining vacancy rates for office buildings in certain major urban centres.

Among the provinces, British Columbia and Ontario recorded the greatest decreases in the non-residential sector. In British Columbia, the $269 million worth of permits issued in July was the lowest level since the beginning of the year.

Metropolitan areas: July's decline widespread across the country

Among the 34 census metropolitan areas, 24 posted declines in the total value of building permits in July.

The largest decreases (in dollars) occurred in Vancouver, Toronto and Calgary. In each area, retreats occurred in both the residential and non-residential sectors, and were preceded by a strong showing in June. A strike in the city of Vancouver contributed to the decline in the total value of permits for the Vancouver area.

Despite the declines in July, Vancouver, Toronto and Calgary showed the strongest year-to-date advances (in dollars) among the metropolitan areas compared with the same period in 2006.

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

Definitions, data sources and methods: survey number 2802.

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

The August building permit estimate will be released on October 4.

To order data, contact Jasmine Gaudreault (toll-free               1-800-579-8533       ;               613-951-6321       ; bdp_information@statcan.ca). For more information, or to enquire about the concepts, methods or data quality of this release, contact Etienne Saint-Pierre (              613-951-2025       ), Investment and Capital Stock Division.