Investment in building construction declined across Canada in May as funding for residential projects fizzled in the face of high interest rates.

According to new data from Statistics Canada, investment in overall building construction fell 1.2% to $19.9B in May, marking the third straight month of decline and the first time investment has dropped below $20B since January 2022.

Continuing along a downward trajectory that began in February, investment in residential construction fell 1.7% month over month to $14B in May.

On a seasonally adjusted basis, investment in single family home construction dropped 2.9% to $7.4B, while investment in multi-unit construction dipped 0.3% to $6.7B.

The dwindling investment in residential construction follows a decline in home sales over the course of 2022. Spurred by rising interest rates, falling sales are now weighing on new construction activity.

Investment in building construction 1Investment in building construction, seasonally adjusted. (Statistics Canada)

On a provincial level, significant losses were seen in Nova Scotia (15.4%), Newfoundland and Labrador (12.9%), and Alberta (4.6%). At $1.2B, the latter fell to its lowest level since December 2020 despite seeing its population grow by more than 56,000 residents in the first quarter of 2023.

Seven provinces posted declines, while six -- including New Brunswick (11.0%), Saskatchewan (9.3%), and Prince Edward Island (8.8%) -- saw investment in residential building construction rise on a monthly basis in May.

Year over year, investment in new single family home construction was down 27.1% on a national level, investment in semi-detached homes dropped 31.3%, and row home construction fell 3.2%.

Meanwhile, investment in new condo and rental apartment construction, which accounts for 50.5% of the market share, rose 2% annually, to $2.9B.

Investment in building construction 2Statistics Canada

After a "consistent and robust" growth streak that began in June 2022, investment in non-residential construction was unchanged in May on a national level, at $5.9B.

Five provinces, including British Columbia (-1%) posted monthly declines, while eight, including Ontario (+2%) saw investment increase.

Investment in the industrial sector dipped 0.4% month over month to $1.2B, a decline which was led predominantly by Quebec -- a 3.2% drop to $11.9M marked the end of 20 consecutive months of growth in the province.

Commercial construction investment edged down 0.2% to $3.2B in May, while the institutional component posted a 0.6% jump to $1.4B. Regarding the latter, Ontario led the gains with a 2.9% monthly increase to $15.4M.

On an annual basis, investment in industrial construction increased 30.1% across Canada, investment in commercial construction rose 11.3%, and investment in the institutional component jumped 4.7%.

Investment in building construction 3Statistics Canada

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