Construction intentions in both the residential and non-residential sectors cooled off in April

Construction intentions in both the residential and non-residential sectors cooled off in April after hitting their second highest total on record the month before.

Builders took out $5.0 billion in building permits, down 10.6% from March. It was the lowest level for permits since November 2005 and 1.5% below the average monthly level for last year as a whole.

In the housing sector, municipalities issued $3.2 billion in permits, down 5.7% from March, the result of declines in both single- and multi-family components. This level was on par with the average monthly level in 2005, which was a record year for the housing sector.

In the non-residential sector, builders took out $1.8 billion in permits in April, down 18.4% compared with March. This decline followed two strong gains in February and March. The retreat was fuelled primarily by a large decline in institutional permits and to a lesser extent by a decrease in the commercial component.

However, both housing and non-residential sectors remained healthy. The value of housing permits has been on an upward trend since the beginning of 2005, thanks to the extremely strong market in Western Canada. Similarly, but to a lesser extent, the non-residential sector has also been on an upward trend since November 2005.

Regionally, the census metropolitan areas of Calgary, Edmonton and Vancouver recorded the largest advances in cumulative figures for the first four months of 2006 in comparison with the same period last year. The housing market was the main driving force in all three centres.

Except for Abbotsford, every metropolitan area west of Ontario showed advances in their cumulative figures compared with 2005. In contrast, the largest decline occurred in Toronto due to a significant decrease in non-residential permits.

Housing: Demand cools for both single- and multi-family dwellings

The value of permits for single-family dwellings declined 4.0% to $2.1 billion in April, the third consecutive monthly decrease. Despite these retreats, the level in April remained 1.1% higher than the average monthly level in 2005.

After two monthly increases, the value of multi-family permits retreated 8.7% to $1.1 billion.

Municipal authorities approved construction of 9,523 new single-family dwellings in April, down 5.5% from March. The number of these approvals has declined in each of the last four months.

Municipalities authorized 8,750 multi-family units, down 10.3%. This component has been on a downward trend since June 2005.

Despite the slight slowdown in the feverish demand for new housing, the overall results remained positive. The residential sector continued to benefit from advantageous mortgage rates, strong full-time employment and the healthy economy in Western Canada.

The decline in housing permits in April came largely from British Columbia (-15.9%) and Alberta (-13.6%). Both declines occurred on the heels of substantial values of residential permits issued in March, and each province recorded marked declines in both single- and multi-family components.

In contrast, Ontario recorded a 6.4% increase, its first monthly gain this year. Strong increases in the value of single- and multi-family permits were the main factor.

Large drop in commercial, institutional permits

Large retreats in the value of institutional and commercial permits more than offset an increase in industrial permits in April.

After an impressive 49.3% jump in March, intentions in the institutional sector incurred the largest decline, tumbling 45.6% to $411 million. The biggest factor was a major decline in the hospital category.

Gains in the educational and the religion building categories failed to offset declines in hospitals. Provincially, Alberta and Ontario reported the largest declines (in dollars), following a robust performance in both provinces in March.

The value of permits in the commercial sector fell 7.5% to $1.0 billion, halting two consecutive monthly increases. The lower demand for permits associated with trade and services buildings in six provinces precipitated this decline. Despite these retreats, the level of commercial building permits in April remained 6.0% higher than the average monthly level in 2005.

On the other hand, intentions in the industrial sector increased 12.6% to $292 million following a 6.1% decline in March. Demand for industrial permits in Ontario was particularly strong, as construction intentions for manufacturing buildings soared.

The non-residential sector continued to be hit by mixed economic indicators, though negative undertones have dominated lately. Canadian corporate operating profits declined 2.6% in the first quarter of 2006, following five straight quarters of growth. On the commercial side, wholesalers also saw their profits slip in the first quarter.

On the industrial side, Statistics Canada's most recent Business Conditions Survey reported that manufacturers were expecting tougher times ahead, anticipating lower levels of production and employment.

Provincially, the largest contributions to the monthly decline (in dollars) in the non-residential sector came from Alberta (-38.3% to $302 million), Ontario (-12.6% to $750 million) and British Columbia (-30.1% to $232 million).

In contrast, New Brunswick and Newfoundland and Labrador recorded increases in all three components.

Non-residential permits were down in 13 of the 28 census metropolitan areas. The largest decline (in dollars) occurred in Ottawa, where all three components fell.

In contrast, Kitchener recorded the strongest increase, mainly as a result of a strong gain in institutional permits.