Building Permits, January 2023

The monthly total value of building permits in Canada decreased 4.0% in January to $9.8 billion. There were eight provinces that reported decreases in January, with the multi-residential sector in British Columbia significantly contributing to the national fall.

The residential sector declined 6.6% to $6.1 billion in January, while the non-residential sector was relatively stable, increasing a modest 0.7% to $3.7 billion. On a constant dollar basis (2012=100), the total value of building permits went down 3.2% to $5.8 billion in January.

Residential sector falls for second consecutive month

Residential permits decreased 6.6% to $6.1 billion in January with seven provinces posting decreases.

The downward trend of multi-family homes continued as construction intentions declined 8.3% in January. Most of the decline stemmed from British Columbia (-27.9% or -$301.2 million) following a month of significant urban development intentions. Conversely, Manitoba posted a notable increase (+106.0% or +$63.0 million) in January.

Total permit values for single-family homes decreased 4.4% in January, with Quebec (-13.5% or -$74.6 million) contributing the most to the decline. Alberta (+0.8%) and British Columbia (+0.6%) were the only provinces to post increases for this component.

Non-residential sector relatively stable month-to-month

The total value of non-residential sector permits was up slightly by 0.7% to $3.7 billion in January, with gains in the commercial component offsetting losses in both the industrial and institutional components.

Commercial permit values increased 5.4% in January, with Ontario leading the charge (+22.8%). This was the second consecutive monthly increase as the component reached the third-highest recorded value since the start of the series (2011).

The value of building permits in the industrial component decreased 3.9% in January, with six provinces posting declines. After reaching its peak at over a billion dollars in November 2022, the component returned to more normal levels in January 2023.

Construction intentions in the institutional sector decreased 5.9% in January, with Quebec (-21.1%) having the biggest decline. Conversely, British Columbia jumped 43.8% due to an $87 million permit for an educational building in Kelowna.

Source: Statistics Canada

How Immigration and an Aging Population Will Affect Canada’s Housing Market

No one can predict the future, of course, but Randall Bartlett, senior director of Canadian economics at Desjardins Economics Studies, has been looking at one small part of what we do know — immigration, our aging population and its effect on the housing market.

If you subscribe to the view that the Bank of Canada is done or close to done raising interest rates, and may even start cutting rates by the end of 2023, then it’s conceivable that housing prices will soon start rising again. But Bartlett says Canada faces a challenge that’s not related to interest rates: It needs to ramp up immigration because of its aging population. Otherwise, Canadians will need to pay more for health care and other services. But that also means the country needs to build housing faster than it’s currently doing to accommodate immigration. This podcast looks at the plausibility of that goal, how fast houses are currently being built, and more. 

To listen to the full podcast, visit the Financial Post website. 

Source: Financial Post

More Canadians Optimistic That Housing Pricing Will Rebound as Consumer Confidence Jumps

Consumer confidence rose to the highest level since the end of September as more Canadians see real estate values rebounding after the central bank conditionally halted its interest-rate hikes. The Bloomberg Nanos Canadian Confidence Index, a measure of sentiment based on weekly polling, jumped by the most since the end of November. The index climbed to 47 on February 24, up from 45.7 a week earlier and 45.3 on Jan. 20, shortly before the Bank of Canada said it would stop to assess the impact of rate increases and hold its benchmark overnight rate steady at 4.5%.

Improvements in sentiment point to expectations of an imminent recovery in Canada’s housing market, which saw benchmark real estate prices plunge 15% from 2022’s peak as higher rates squeezed buyers. More than a quarter of respondents now expect prices to rise in the next six months, the highest proportion since September — though still below historical averages.

“Views on real estate have consistently been a foundational element in consumer confidence,” said Nik Nanos, chief data scientist of Nanos Research. “Although not returning to the exuberant levels from a year ago when the housing market was red hot, the weekly tracking is seeing the beginnings of a potential positive trajectory.”

The jump is more evidence of a sustained rebound for Canadian consumers at the start of 2023. Sentiment is still recovering from late in 2022, when the index recorded some of the most pessimistic readings since the depths of the COVID-19 pandemic because of uncertainty about the economic outlook, inflation and interest rates.

Every week, Nanos Research surveys 250 Canadians for their views on personal finances, job security, the economy and real-estate prices. Bloomberg publishes four-week rolling averages of the 1,000 telephone responses.

Recession fears are also abating. About 48% of respondents now expect the economy to be weaker in six months time, down from nearly 64% in November.

Source: Financial Post