The Importance of Building Permits in the Canadian Economy
Building permits are considered one of the major factors that contribute to determining the growth path of the real estate sector. Building permits also reflect the economic situation in the country, as they can show whether there is a boom or recession in the market. When the number of permits increases, this usually reflects strong demand for real estate and positive expectations about the economic future. Conversely, a decrease in the number of permits indicates a decline in economic activity or the possibility of a recession in the construction sector.
Building permits also directly affect employment in the construction sector. As new residential or commercial projects increase, contractors need more workers to meet demand. This helps reduce unemployment and boosts the Canadian economy in general. Therefore, building permits serve as a key indicator of economic activity and the expected future of the real estate sector.
Reasons for Fluctuations in Building Permits
There are several reasons that lead to fluctuations in Canadian building permits on a monthly basis. These reasons range from internal and external economic factors. Government decisions related to taxes, urban planning, and credit can affect the number of building permits in any given month.
- Interest Rate Impact: Interest rates are an important factor that affects the real estate market. When the government raises interest rates, demand for mortgages decreases, leading to a decline in building permits. This is because borrowing costs become higher.
- Government Policy: Government policies play a major role in building permits. For example, urban planning and housing policies can influence the decision to grant building permits. The government may decide to increase the construction of social housing or reduce congestion in certain areas, which reflects in the number of permits issued.
Building Permits October 2024
The total value of building permits issued in Canada decreased by $399.1 million (-3.1%) to $12.6 billion in October. This follows a strong September, in which building intentions rose by $1.3 billion to the second highest level in the series. Despite the monthly decline in October, the total value of building permits was the fourth highest level in the series. In October, Ontario building intentions ($-696.4 million) contributed significantly to the national non-residential decline, dampening overall residential growth, after fueling gains in both sectors in September.
On a constant dollar basis (2017=100), the total value of building permits in October fell 3.6% from the previous month and was up 8.1% year-over-year.
Building intentions decline in Ontario and Manitoba push the non-residential sector lower
The total value of non-residential building permits fell $576.3 million (-1.1%) to $4.7 billion in October, led by Ontario ($-300.9 million) and Manitoba ($-207.5 million). Overall, the institutional ($-368.2 million), commercial ($-127.5 million), and industrial ($-80.6 million) components declined.
Ontario’s non-residential sector in October declined, driven by the institutional component ($-241.9 million), following the province’s record high in September. Manitoba’s decline in October resulted from the industrial component ($-141.0 million).
Residential building intentions rose $177.1 million (+2.3%) to $7.9 billion in October. British Columbia ($+275.6 million) and Alberta ($+158.9 million) led residential growth, which was also supported by Nova Scotia ($+73.7 million) and Manitoba ($61.3 million).
The value of the multifamily component increased by $37.6 million in October. Month-on-month gains were observed in seven provinces and one territory, led by British Columbia ($+261.4 million) and Alberta ($+129.8 million).
Building Permits August 2024
The total value of building permits in Canada fell by $858.1 million (-7.0%) to $11.5 billion in August, following a strong July in which building intentions rose sharply (+20.8%). Both the residential and non-residential sectors contributed to the decline in August.
On a constant dollar basis (2017=100), the total value of building permits fell by 7.6% in August
The non-residential sector declined in all three components despite a sustained level of industrial permits
The value of non-residential building permits fell by $471.0 million (-9.7%) to $4.4 billion in August, driven by lower institutional building intentions (-$382.2 million). Both the commercial (-$46.2 million) and industrial (-$42.6 million) components also contributed to the decline in the non-residential sector.
The monthly decline in the industrial component in August followed strong growth in July. Despite the monthly decline in August, the industrial component was the fourth-highest in the series and saw a 49.0% year-over-year increase, the second consecutive year-over-year increase. The relatively high level of the industrial component was driven by battery plant permits worth more than $900 million in St. Thomas, Ontario.
The permits follow a series of construction intentions to build the battery supply chain in municipalities including Windsor, Ontario, and Bécancour, Quebec. The battery manufacturing plans are part of the federal, Ontario, and Quebec provincial governments’ efforts to develop Canada’s electric vehicle supply chain
California Building Permits, May 2024
In Canada, the total value of building permits was $11.7 billion in May, down 12.2% from a record high of $13.4 billion in April. British Columbia led the national decline in May with a massive 50.7% decline after seeing a record high for the total value of building permits issued in April. Excluding British Columbia, the total value of building permits for the remaining provinces and territories fell 0.7% in May.
