Canada Enjoys Building Boom

Wednesday, August 6th, 2003

B.C. outpacing rest of country in hike in building permits

Eric Beauchesne

The economy may be slowing, but nobody seems to have told home-builders.

Housing construction, fuelled by consumer confidence and low interest rates, is booming and should continue to do so for months to come, Statistics Canada said Tuesday.

“The country’s residential sector continues to perform at a torrid pace, setting records for both single-family and multi-family permits for the first half of the year,” it said.

In B.C. the January to June 2003 total for residential permits hit $2.1 billion, a 17.3-per-cent increase over the same period for 2002, well outpacing the national increase of 8.0 per cent.

“The residential sector’s vibrancy appears to underscore consumer confidence in investment in housing,” it continued. “Modest mortgage rates and a generally favourable job environment have encouraged people to abandon rental accommodations in favour of home ownership.”

The result: rising rental vacancy rates in some cities, including Toronto and Ottawa, and a surge in building plans for row housing (more affordable for first-time homebuyers) to a near 10-year high, StatsCan said.

The value of building permits issued for single-family homes hit a high of $10.7 billion in the first six months of the year, up 2.2 per cent from a year earlier, it said. And the value of multi-family permits issued also posted a new record of $4.4 billion, up 9.9 per cent from the same six months last year.

“In June alone, [Canadian] builders took out $1.8 billion worth of permits for single-family homes, up 4.3 per cent from May,” StatsCan said. “The value of permits for multi-family dwellings rose 5.2 per cent to $788 million in the wake of a record month for row-housing permits.”

And it’s not just homes that are hot.

An increase in institutional construction plans, particularly for medical buildings, and especially in Alberta, helped boost over-all building construction plans in June to $4.3 billion, up 4.3 per cent and four times what analysts had expected.

That was only the third monthly in-crease this year, but was still enough to boost the value of permits issued during the first half of the year to a record $24.9 billion, an eight-per-cent jump from the same period last year.

“This signals strong activity on construction sites for some time to come,” Statistics Canada said.

However, RBC economist Allan Seychuk cautioned that construction permits are a “volatile indicator that does not lead in lock-step fashion to corresponding gains in construction activity.”

While home-building has been a consistent source of economic strength for two years and this year’s level is up from a record year in 2002, he warned it may cushion the economy against the impact of slower U.S. growth and the stronger Canadian dollar.

As such, he said, the news does not offset the need for a further cut in interest rates by the Bank of Canada before summer’s end.

Canadian municipalities issued $1.7 billion in non-residential permits in June, up 3.9 per cent from May.

“In the first half of the year, non-residential construction intentions reached a record $9.8 billion, a strong growth of 14.3 per cent from the first six months of 2002,” it said.

Declines in Vancouver led to a 2.5-per-cent decrease in B.C. to $850 million in non-residential construction.

Ontario and Alberta recorded non-residential increases of 13.9 per cent (to $4.7 billion) and 25.1 per cent (to $1.3 billion) respectively.

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