Canadian building investment is falling, and it’s due to a lack of housing investment. Statistics Canada (Stat Can) data shows total building investment fell in July. Taking a dive into the data, we can see this is due entirely to falling residential investment. While it dropped, no need to worry about an inventory squeeze. The amount of capital sunk into residential building construction is still very high.
Canadian Building Construction Investment Fell 1.7%
Building construction investment made a sharp drop, but is higher than usual. The value of investment reached $18.1 billion in July, down 1.7% from the previous month. Compared to last year, this represents an increase of 17.6% — still a substantial increase. It wasn’t due to a base effect either, with last July coming in fairly close to the year before. Stat Can attributes the drop to housing investment, which weighed on the total index.
Canadian Residential Construction Slows For A Third Month
Residential building construction is spiraling lower, as new housing demand softens. The total of residential investment fell to $13.4 billion in July, down 2.6% from the month before. Single-family construction investment represented $7.2 billion, down 4% over the same period. Multi-family (a.k.a. condo apartments) fell to $6.2 billion, down 0.9% from last year. The whole drop in building construction is due to just these segments.
Canadian Residential Building Construction Investment
The monthly dollar value of residential building construction in Canada, by housing segment.
Source: Stat Can; Better Dwelling.
Residential Housing Investment Slows, But It’s Still Elevated
Oh, no! What about the lack of supply, right? Well, lower than peak growth isn’t exactly the same as less development. Single-family investment is still 35.3% higher than last year, and multi-family is 21.4% higher. Investment is still significantly elevated, it’s just cooling to more sustainable levels.
Lower monthly growth and higher annual growth is a bit of a mixed read, but it makes sense. Falling monthly investment is still a slowdown and a drag on economic growth. The falling growth will probably lower input costs, such as labor and materials. In terms of total supply coming to market, it’s likely not that big of a concern. It’s significantly elevated from previous years.
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