Residential leads building permit increases
November 10, 2021
Rising values in multi-family construction led Canadian building permits to an 8.2 per cent increase, to $10.14 billion, in September 2021 compared to August 2021 according to recent Statistics Canada data.
This increase marks a reversal from the drop in residential permit value in August. Non-residential permit value went down by 3.2 per cent in September.
The rise in residential permit value was driven by multi-family permits—particularly high-value permits for condominium buildings valued at more than $300 million in Ontario.
On a year-over-year basis, third-quarter building permits actually saw a decline in real dollar value (adjusted for inflation) from the height of the construction craze in 2020. The nominal increase in September came as a result of high costs for construction material and labour, noted Tu Nguyen, an analyst with Toronto-based tax and consulting firm RSM Canada LLP.
Building permit value serves as an indicator of future construction. While housing starts have been slowing down due to shortages of materials and labor, pushing prices up, building permits have remained consistently higher than pre-pandemic levels.
RSM expects demand for downtown office space will stay low in the world of flexible work and that construction efforts will shift away from commercial office buildings.
But new housing products will remain in high demand, Nguyen explained. “For decades, Canada has been adding more people than housing, leading to an immense shortage of residential housing across the country. With strong demand for residential buildings, construction companies will continue to capitalize on the opportunity to build and sell residential dwellings. The main barrier standing between developers and eager buyers is scarce construction materials and labour,” Nguyen stated in a RMC bulletin.