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Building intentions tick higher

Building intentions tick higher

Posted on: 5/9/2018 | Author: ATB Financial's Economics + Research Team

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Contrary to popular mythology, economists possess no crystal ball. We do, however, have a series of indicators that do a reasonably good job in foretelling what's to come. They’re known as “leading indicators” — and among the best one is building permits. These point to the direction in which construction activity will move in the coming months.

The value of total building permits in Alberta climbed to $1.31 billion in March, an increase of more than nine per cent compared to March of last year. The increase in permits over the last year, however, was split down the line between residential and non-residential.

Residential permits in March were $850 million, matching the level set in February. Over the last complete 12 months, residential building permits are higher by 7.3 per cent compared to the same period a year earlier.

Non-residential construction intentions, on the other hand, are moving in the opposite direction. They did pick up a bit in March to $460 million, but over the last 12 months, total permits for non-residential projects are down 7.8 per cent compared to a year ago.

The increase in residential permits over the last year is a bit of a concern, particularly given the growing number of unabsorbed homes (especially in Edmonton and Calgary). Home builders may find themselves with a glut of inventory on their hands unless demand for new homes picks up in 2018. And given the stricter mortgage lending rules and higher interest rates, that may not happen quickly.

Building permits, graph

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