In a climate of climbing interest rates and high inflation, Canada is seeing a notable drop in building permits.
As Statistics Canada (StatCan) reported yesterday, the value of Canada’s building permits fell by the most on record in September -- a loud and clear indication of the trying economic times. According to the latest StatCan data, the total value of building permits for the month plummeted a dramatic 17.5% from August, to $10.2B.
This marks the sharpest monthly decline on record.
Quarterly, the country’s building permits were down 6.3% between July and September -- to $33.7B -- after three consecutive quarters of increases. Year-over-year, the overall value of permits issued in September was down 2.5%.
New homes under construction/Shutterstock
The notable drop was seen in both the residential and non-residential sectors, with both sectors posting declines for the first time since September 2019. In the residential sector, permits dropped 15.6% from the previous month, to $7.04B, according to StatCan. This was weighted heavily by a drop of 21.2% multifamily dwelling permits, a figure that is largely attributed to a 40% drop in Ontario from a record-high in August.
Meanwhile construction intentions for single-family homes dropped 7.7%, with notable declines in Ontario, Manitoba and Alberta. Furthermore, the non-residential sector saw permits decline 21.5% to $3.18B, with both the institutional and commercial components falling by 37.2% and 11.5%, respectively.
The drop in permits is likely a reflection of fewer people looking to get into the market at present time, due to interest rates that render the possibility of a mortgage a pipe dream to countless Canadians. Last week, the Bank of Canada raised its overnight lending rate by 50 points to 3.75% and has indicated that we could expect even more hikes.
So, it won't be entirely surprising if we see further drops permits in the months ahead.