Canadian Home Building Intentions Are Worse Than 2019 Despite Gov Stimulus

Canadian policymakers are scrambling to make daily announcements of helicopter cash to stimulate building, but it may have the opposite effect. Statistics Canada (Stat Can) data shows building permit application values slightly increased in January. However most of the gain was lost to inflation, especially when it came to new housing—a segment that showed nearly zero real growth and is now worse than 2019.

Canadian Building Intentions Show Slight Improvement, Remain Weak

Canadian building permit values improved slightly. The unadjusted total value of permit applications climbed 7.1% from last year to $7.9 billion in January. When adjusted for inflation, growth trims to just 3% for the same period. It’s better than shrinking, but not by much. 

Canadian Future Building Intentions Are Being Crushed By Inflation

The total unadjusted value of Canadian residential and non-residential building permit applications. In nominal and constant (2017) dollars.

Source: Statistics Canada; Better Dwelling.

Canadian Permits To Build New Homes Are Below 2019 Real Values

Despite nonstop talk of a housing shortage, residential building intentions are a weak spot. Residential permit values climbed 3.4% to represent $4.4 billion of January’s total. That’s just a shade over inflation, falling to 0.1% when adjusted into real terms by Stat Can. 

Policymakers have hit the public with a barrage of announcements about helicopter money to stimulate housing development. It doesn’t appear to be stimulating new projects so much as it’s replacing existing capital, considering real permit values are still under 2019 levels. 

Canadian Real Home Building Intentions Aren’t Even Back To 2019 Levels

The unadjusted value of Canadian residential building permit applications.  In nominal and constant (2017) dollars.

Source: Statistics Canada; Better Dwelling.

Canadian Non-Residential Building Intentions Are Recovering

Non-residential, including institutional and commercial, are one bright spot for builders. The value of these permit applications climbed 12.2% to $3.5 billion in January, representing close to half of the total value for the month. Adjusting to real terms trims annual growth to a healthy 7% over the period. That’s good news since this has been one area neglected despite being essential to facilitating the population boom. It may have come with a caveat. 

The increase is due to commercial permit values, with a single project representing a large share of growth. A $200 million data center being built in Quebec represented nearly a tenth of all commercial permit value. Certainly a boon for the region, but it’s difficult to see that turning into repeatable and renewed growth for the segment. 

Rising costs largely wipe out most of the progress made regarding building intentions. This is especially true for residential, where inflation drags intentions below 2019. Stimulating building beyond fundamental market supports may sound helpful but tends to only turn inflationary. That can produce the opposite of the desired effect—at least the opposite of the desired effect openly stated by policymakers.