Future construction intentions for buildings in Canada have fallen as interest rates have risen, according to permit data. Data from Statistics Canada (Stat Can) show that the value of building permits, a leading indicator, dipped slightly in March. Future construction plans remain high compared to those before 2020. However, residential plans have slowed as expected after record building activity.
The value of building permits in Canada fell 9% in March
Canadian building permits plunged in the latest numbers. The value of building permits reached $11.7 billion in March, down 9.3% from the previous month. Although down, future construction intentions remain 5.2% higher than last year, at least in dollars. The non-residential sector is behind the monthly decline. Annual growth was slowed by the reduction in residential construction projects.
Residential building permits in Canada are 3% lower than last year
The monthly dollar value of residential permits hit a 12-month high. The value of permits reached $7.9 billion in March, up 4.7% from the previous month. Compared to last year, the value is 3.2% lower. Due to the construction boom over the past two years, combined with higher interest rates, a slowdown was widely expected this year.
Future construction intentions in Canada
The seasonally adjusted value of residential and non-residential building permits in Canada.
Source: Statistics Canada; Live better.
Non-residential building permit values remain high, but with noise from a few projects
Non-residential construction is a much smaller segment, including commercial and institutional buildings. The value of permits for the segment soared to $3.72 billion in March, down 29.5% from the previous month. However, future construction intentions are still up 28.9% from last year. The unusual monthly drop was due to a temporary increase due to two hospitals, which pushed the numbers up in February. This segment hasn’t seen a boom in the last couple of years, so we’re mostly seeing a normalization of activity.
Future construction intentions remain high, especially for non-residential buildings. Residential construction intentions are still higher than before 2020, but show signs of decreasing. Low rates drove demand forward while rising rates helped drive it out more. This year, at least one financial institution expects new housing starts to decline by a fifth.