Building Intentions Moderate Sharply

October 7, 2010
By Dan Sumner, Economist, ATB Financial

Residential building permits in Alberta showed strong resilience during 2010 as builders continued to plan construction projects despite moderating activity in the resale housing markets; however, that resilience may have finally started to give way in August.
Cities in Alberta issued permits for $851 million (seasonally adjusted) worth of construction projects in August, a decline of 11.1% from July. The decline was due entirely to fewer residential permits, which plunged 20.6% to $481 million. August’s decline brought residential permits to their lowest since June 2009. Prior to the fall, residential permits had hovered just above the $600 million mark for nearly a year (see graph).
Whenever builders want to begin a project they must first take out a building permit. Hence these figures provide a forward looking indication of how many and what kind of
construction projects will commence in the coming months. Across cities, both Calgary (-27%) and Edmonton (-24%) saw significant monthly declines in residential construction intentions in August. Prior to August, residential permits had been very strong in Edmonton, rising to pre-recession highs over much of 2010. In Calgary the recovery from the recession had been much more subdued.
The resilience of construction intentions during the summer of 2010 was somewhat surprising given the slowing housing markets. August is only one month of data and hence does not constitute a trend yet, but it is possible that these figures mean builders will be starting fewer new homes and condominium projects over the next few months and into 2011.