Building permits

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The value of building permits in January fell below the $6-billion mark for the first time since April 2007. An increase in the non-residential sector was insufficient to compensate for fewer construction intentions in the residential area.

Municipalities issued $5.9 billion worth of building permits, down 2.9% from the December 2007 value of $6.0 billion. This was a third consecutive monthly decline.

Despite the recent declines, building sites should remain busy in the first part of 2008 since construction intentions were strong in 2007. Building permits are a leading indicator for construction activity.

In the residential sector, the value of building permits dropped by 13.9% to $3.3 billion. This was fuelled by a 26.9% drop in multi-family housing. Intentions also decreased in the single-family component (-5.4%).

After two consecutive monthly decreases, the value of non-residential permits increased by 16.4% to $2.5 billion. January's gain was due to increases in institutional, commercial and industrial permits.

Important movement in permits in Ontario

Provincially, the largest gain (in dollars) occurred in Ontario, where municipalities approved $2.4 billion worth of permits in January. A record high was reached in the value of non-residential permits (+68.8% to $1.4 billion). The Ontario non-residential components (industrial, commercial and institutional) all had very high values in January. These increases more than offset a 29.1% drop in residential permits, the largest among all provinces.

Alberta also posted a significant gain (+4.2% to $1.2 billion) in the total value of permits, thanks to growth coming from the industrial and the institutional components.

Quebec experienced, to a lesser extent, a state of affairs similar to Ontario. A decline in residential permits (-2.7%) was offset by an increase in non-residential sector (+14.0%) leading the total value of permits to $989 million in January, up 1.9% from December.

The total value of building permits fell in four provinces. With significant drops in both residential and non-residential components, the largest decrease in dollars occurred in British Columbia, where the total value of permits dropped 22.4% to $815 million, the lowest level since April 2006.

Important retreats also occurred in Saskatchewan (-44.4%) and Newfoundland and Labrador (-54.6%). In both provinces, the drops followed exceptional results in the non-residential sector in December.

Housing sector: The demand for multi-family units drops

The value of permits for multi-family dwellings fell by 26.9% in January to $1.1 billion, the lowest amount since February 2007. The number of multiple-family units approved decreased by 17.6% to 8,216.

Single-family permits decreased by 5.4% to $2.2 billion. The corresponding number of units declined by 5.5%.

Both single- and multi-family units approved have been on a downward trend since the summer of 2007.

Strength in employment, growth in disposable income, dynamic economy in Western Canada and tight apartment vacancy rates in certain centres are factors that could affect positively the demand for housing. On the other hand, the impact of price increases on housing affordability and the signs of a weakening US economy and their spillover effects in Canada could erode the demand.

All non-residential components are on the rise

The value of permits in the institutional component jumped 26.6% in January to $701 million. This gain followed two consecutive monthly declines. Large projects for medical buildings in Ontario and Alberta were behind this marked increase.

The value of commercial permits gained 9.0% in January to $1.4 billion, thanks to several large projects for office buildings in Ontario. In 2007, this category played a key role in the strong showing of the commercial component.

Having reached a 10-month low in December, the value of industrial permits rebounded with a 28.1% gain in January as the value of permits totalled $423 million. Construction projects for manufacturing buildings in Ontario and for utility buildings in Alberta led to this gain.

Despite the strong results in January, the value of permits in the commercial and industrial components has been on a downward trend since the summer of 2007. In contrast, the institutional component has been maintaining its upward trend since February 2007.

The non-residential sector continued to be positively affected by low office vacancy rates, the vigorous retail sector and strong corporate profits. Furthermore, business and government intend to increase their spending in non-residential construction in 2008, according to the latest Private and Public Investment Survey released on February 27, 2008.

Metropolitan areas: Sharp decline in Vancouver

The total value of permits declined in 15 out of the 34 metropolitan areas in January. The largest decline occurred in Vancouver as $427 million worth of permits were issued, the second lowest level since April 2006 (the lowest being in September 2007 when there was a municipal strike in the city of Vancouver). Marked declines occurred in both residential and non-residential sectors. Barrie and Saskatoon also showed substantial declines in January, after record levels in December 2007.

In contrast, significant increases occurred in Edmonton, London and Montréal due largely to projects in the non-residential sector.

In Toronto, a tremendous gain in the non-residential sector (+143.2%) was largely offset by a sharp decline in residential construction intentions.

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

Definitions, data sources and methods: survey number 2802.

The January 2008 issue of Building Permits (64-001-XWE, free) will be available soon.

The February building permit estimate will be released on April 7.

To order data, contact Jasmine Gaudreault (613-951-6321; toll-free 1-800-579-8533; bdp_information@statcan.gc.ca). For more information, or to enquire about the concepts, methods or data quality of this release, contact Nicole Charron (613-951-0087), Investment and Capital Stock Division.

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