Canada's Housing Bubble

Oct 07, 2010 The Canadian Press

The value of Canadian building permits issued in August tumbled 9.2 per cent compared with the previous month as contractors pulled back more than expected in the non-residential sector.

Statistics Canada reported Thursday that contractors took out $5.7-billion in building permits overall for the month, with the downturn in the non-residential sector outweighing an increase in the residential sector.

“It was a surprisingly large drop,” said Doug Porter, a Bank of Montreal economist.

“Of course, building permits are arguably the most volatile economic report that Statistics Canada releases, so you obviously have to treat it with a little bit of caution – especially permits in the non-residential sector, which can be extremely lumpy,” Mr. Porter said.

The total value of building permits increased in five provinces: New Brunswick, British Columbia, Newfoundland and Labrador, Manitoba and Saskatchewan. It was down in five others, with the largest decreases coming in Ontario and Alberta.

After four months of decline, the value of residential sector permits issued by municipalities increased two per cent to $3.5-billion in August.

At the same time, they issued just $2.2-billion worth of non-residential permits, down 22.9 per cent from July as building intentions declined in all three components of the non-residential sector in August.

The value of permits in the institutional component fell 38.9 per cent to $705-million in August after two straight monthly increases that brought the level to a new high.

In the commercial component, municipalities issued permits worth $1.1-billion, down 12.2 per cent from July, while industrial intentions fell 11.5 per cent to $369-million, the third straight monthly decline.

Municipalities issued $1.5-billion worth of permits for multi-family dwellings in August, up 12.9 per cent from July and the highest value since July 2008. The value of single-family permits decreased 4.9 per cent to $2-billion.

Municipalities approved the construction of 16,764 new dwellings in August, down 0.3 per cent from July.

Statistics Canada said a 10.8 per cent decrease in the number of single-family dwellings, which totalled 6,488, more than offset a 7.7 per cent increase in the number of multi-family dwellings, which totalled 10,276.