Canada

Canadian Building Permits Make Historic Drop, As Real Estate Slowdown Spreads

Canada’s real estate boom is starting to slow down, with fewer new projects taking the first step. Statistics Canada (Stat Can) data shows the dollar value of building permits fell in May. After coming off of record highs, a decline should have been expected for the most part. The size of the fall was definitely a surprise though, making the largest monthly drop in history.

Canadian New Building Permits Make The Largest Drop On Record

Canadian building permits took a historic nosedive in the latest numbers. The dollar value fell to $9.5 billion in May, down 14.8% from the month before. It was somewhat expected after printing four consecutive months of all-time highs. However, the size of the drop was out of nowhere. It was the biggest on record.

Canadian Building Permits

The monthly value of building permits across Canada.

Source: Stat Can; Better Dwelling.

Canadian Homebuilding Is Behind The Majority of The Drop

The vast majority of the decline was in the residential sector, which made a sharp turn lower. Residential permit values declined to $6.5 billion in May, down 16.0% from the month before. New home sales have been softening recently. Combine that with developers delaying projects due to material costs, and the numbers are easily explained. 

Canadian Building Permits

The monthly value of building permits across Canada, broken down by residential and non-residential segments.

Source: Stat Can; Better Dwelling.

Non-Residential Permits Cratered, Largely Due To Ontario

Non-residential building permits also dropped, with the industry now significantly smaller than residential. The value of non-residential permits fell to $3.0 billion in May, down 12.2% from the month before. Ontario in particular saw an abrupt decline in non-residential permit values. Stat Can noted there were zero permits filed for projects over $25 million in the province. A bit odd for a province the size of Ontario, that’s seen mega projects announced every few weeks.

Falling permit activity is off record highs, meaning a supply bottleneck is unlikely. Most of the drop was in the residential segment, but commercial activity also pulled back. More than likely the decline is due to pulled forward projects, and delays due to soaring costs.

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18 Comments

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  • Omar 3 months ago

    Agents keep saying “pulled forward demand” and then when the gap arrives, they pretend it’s just transitory.

    • Kyle 3 months ago

      All growth spurts are transitory, never roll back, but just be fine with it.

  • Adam J 3 months ago

    Where will people live if they stop building those $1,000/month sub-200 sqft microsuites in BC?

    • Gerry 3 months ago

      Good question Adam. Add 400k immigrants every year to that and it starts looking really ugly. Keeping inventory low as well as interest rates also acts as support for the stupid high real estate prices today. This is probably why we still see bidding wars and rising prices even when sales are slowing; the demand is still there no matter what.

    • Doomcouver 3 months ago

      I’m going to go out on a limb here and say that the homebuilders are probably starting to get nervous about what a re-opening means for the demand for housing. Government stimulus is winding down, unemployment is above 8%, and people will be going back to work and wanting to get rid of their rural pandemic hideouts en masse potentially. Add to that people may be more likely to leave Canada to find work elsewhere when global travel gets back to normal, and you have a lot of downward pressures on Canadian housing prices all at once. Just like how a lot of people thought that the pandemic would finally pop the housing bubble and it had the opposite effect, all the people that expect the reopening will be bullish for housing might be equally disappointed.

  • Brian 3 months ago

    This is not game about supply and demand. This is about greedy and control.
    Clearly there are people who does not want more houses built and control the building permit.

    • Paul 3 months ago

      Actually the article said material costs are mostly to blame. Why bother commenting if you can’t read.

      • Han 3 months ago

        Material costs are a real concern. They had an article the other day where a lumber exec said his wholesalers are telling clients not to buy at these levels.

        It’s hard to price in this kind of increase in home prices.

      • Brian 3 months ago

        People sometimes make comment outside of the track of the article irrelevant to their reading skills.

        I may need to open dictionary from time to time but still there are hands that control the building permit.

        Wait and see, when prices of building material drops there will be 10 other reasons not enough houses being built.

  • Shantel 3 months ago

    What affect would that have in short and long term on the residential pre-construction units? How would it affect the investors that have already invested in
    pre-construction properties?

  • Bob Walter 3 months ago

    So instead of building 18 houses per person added to the population they now build 5?

    • NO LAND IN OUR COUNTRY 3 months ago

      There is NO land in Canada.
      Its a lobby of entitled Canadian elite. Slavery that masked as ” we are the number one country in the world “. Propaganda.

      • D 3 months ago

        Canada is not a real country if you think about it. Every country had a war of independence from their previous masters, not Canada. There’s no such thing as a free lunch and Canada is still not an independent nation. Canada was given “independence”. That tells you a lot. Canada is fully owned by the City of London corporation as is UK, Australia, NZ and any country where Elizabeth is the “head of state”. India is still a common wealth nation as every ex British colony, they are owned by London but not as much as Canada. They rightfully kicked out the Queen.

  • Pete 3 months ago

    Its a building boom in the US.
    Everyone who wants a house is going to have a house. Crash is going to happen there, but all people can afford a house of some type, not like in Canada.

  • Aman 3 months ago

    This is one of the way looser government want to keep real estate boom. Lower supply triggers higher demands make price higher.

    Simple economic equation i study in grade 10.

    Stop this news if that is not really happening

  • Jigar Suratwala 3 months ago

    Market should crash early rather than just a slow down.

  • Yogi 2 months ago

    Guys please there is no crash coming. As long we have government intervention and cooperation from industry to manipulate the economics of housing through supply manipulation, interest rates, lending policy etc.. and the fake news cycle this market will not crash. I was a housing bear for the longest time till I finally realized that housing is not a free market. It’s just too big to fail given how much of it is tied to GDP.

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