The value of building permits remained above the $6-billion mark for the sixth month in a row in October, thanks to marked gains in commercial and institutional intentions and strong demand for multi-family units.

Municipalities issued building permits worth $6.7 billion, up 6.8% from September. This level was slightly below the peak of $6.9 billion observed in both May and June. In the non-residential sector, intentions rose 19.3% to $2.6 billion. A decline in industrial intentions was insufficient to offset the strong increases in the commercial and institutional components. In contrast, intentions in the residential sector remained stable at $4-billion. Strong growth in multiple housing was offset by the drop in the single-family component.

On a year-to-date basis, municipalities issued $62.1-billion worth of permits from January to October, up 14.2% from the same period in 2006. This was only $4.2-billion short of the record for an entire year, set in 2006.

Housing sector: Strong demand for units in multi-family
The value of permits for multi-family dwellings surged 21.8% in October to $1.6 billion, the second-highest level since December 2005. The number of multiple-family units approved rose 17.7% to 10,850. The value of single-family permits fell 10.6% to $2.4 billion. The number of single-family units authorized declined by 6.6% to 9782.

The gain in the number of approved multi-family units, combined with the decline in single-family units, is consistent with the recently observed shift in demand. Since the beginning of 2007, multi-family units have accounted for 51.1% of the total, compared with 48.9% for all of 2006. Strength in employment, growth in disposable income, tight apartment vacancy rates in certain centres and attractive financing options continued to stimulate the demand for housing.

However, this demand could be eroded by the deterioration of housing affordability due to rapidly growing prices for new housing and recent increases in mortgage rates. Provincially, the largest increase (in dollars) occurred in British Columbia, where the value of housing permits rose 38% to $848 million. This gain originated from a 70% increase in multiple residential units approved. However, it should be noted that totals in previous months were smaller, partly because of a municipal strike in Vancouver.

In Quebec, strength in the multi-family component led to increases in the total value of residential permits (+13.6% to $807 million). The largest decline (in dollars) in residential permits occurred in Ontario (-10.9%), the result of a substantial decline in single-family permits. Residential intentions in Alberta fell 19% to $640 million.

Non-residential sector: Strong demand for commercial space in Calgary
The value of non-residential permits surged in October, thanks to the strong demand for commercial space in the Calgary census metropolitan area. Excluding Calgary, the total value of non-residential permits nationally would have increased by only 3.9% instead of 19.3%.

A large part of the overall gain in the non-residential sector came from commercial construction intentions. The value of commercial permits totalled $1.6 billion, up 23.1% from September. Despite the big gain, October’s level fell short of the record reached in May ($2.1 billion). The value of commercial permits in October was 14% above the average monthly level recorded between January and September 2007.

In addition to various construction projects for hotels and buildings in the retail sector and in the recreation category, large construction projects in Calgary for office buildings and warehouses contributed significantly to the strong showing. In the institutional component, the value of permits increased 29.8% to $672 million in October following a 15.8% decline in September. In 2007, this level has only been surpassed by June’s level ($713 million). The growth in October came mainly from construction projects for hospitals and education buildings.

The value of institutional permits has been on a general upward trend since the end of 2006. In the industrial component, the value of permits issued in October declined 9.7% to $326 million, a third consecutive monthly decline. This was the second-lowest level in the last 18 months; only February 2007 results were lower ($307 million). The decline in industrial permits came from a drop in utility buildings.

Provincially, the largest gain (in dollars) in October occurred in Alberta, where the value of non-residential permits hit its second-highest level on record ($751 million). The gain came solely from the commercial component as declines occurred in both institutional and industrial permits. British Columbia and Quebec also posted sizeable gains, with increases in commercial and institutional permits for both provinces. Among the provinces, Saskatchewan and Newfoundland & Labrador posted the most important retreats.

The non-residential sector has been very healthy since the beginning of the year. Between January and October, municipalities have issued $24.4-billion worth of non-residential permits, up 19.5% from the same period in 2006. Marked increases occurred in all three components: commercial (+23.6%), industrial (+18.2%) and institutional (+11.2%). Among the factors contributing to this strong growth are vigorous retail and wholesale sectors, low office vacancy rates in several centres, strong corporate profits, and increasing demand for health and nursing facilities.

Toronto and three major western metropolitan areas lead the pack
On a year-to-date basis, 24 out of the 34 census metropolitan areas recorded gains in the total value of building permits between January and October compared with the same period in 2006. The most important gains (in dollars) were recorded in Toronto and Calgary, where construction intentions for non-residential buildings increased drastically. Vancouver and Edmonton were far behind, but showed strong gains in the residential component. In contrast, Windsor and Oshawa showed the largest declines. Except for Sherbrooke and Abbotsford, all metropolitan areas showing losses were in Ontario.