Alberta building permit drop in June a 'healthy rebalancing,' says ATB economist

The number of buildng permits issued by municipalities in June 2016 is down 40 per cent from June the previous year. ATB Financial's senior economist says it's a "healthy rebalancing" even though that contraction is expected to continue for the next six months.

Permits expected to continue to ebb lower over next few months

CBC News Posted: Aug 08, 2016 1:59 PM EDT | Last Updated: August 8, 2016

construction workers build a roof — Construction workers build a new house in Calgary in 2015. The number of building permits issued in Alberta in June 2016 is down 40 per cent from June the previous year. (Todd Korol/Reuters)

The number of building permits issued by municipalities in June 2016 is down 40 per cent from June the previous year, according to ATB Financial.

And even though that contraction is expected to continue for the next six months, its senior economist believes it's warranted.

"Building permits are about the best leading indicator we have for the construction industry," said Todd Hirsch.

"So the building permits in Alberta they are down from where they were of course abouta year or two ago. And that's not a big surprise, in 2014 you saw a surge of building constructionand activity and now it's all pulling back now that we're in a recession," he said.

Figures from Statistics Canada show the total value of all permits issued in June in Alberta dropped to $877 million, about 40 per cent lower than the same month last year.

Residential permits are down 23 per cent when comparing the last 12 months to the previous 12 months.

Residential permits picked up modestly in June 2016 to $510 million. But even with the slight improvement, there has been a noticeable drop in builders anticipated activity, according to ATB Financial. (ATB Financial)

However, Alberta had record high construction activity in 2014 and even into early 2015, said Hirsch.

"So the pullback that we're seeing now it is pretty dramatic but it really is putting us back to building permit levels about where we were in 2011 and 2012 and that wasn't terrible," he said.

Calgary has a huge glut of commercial office space, so Hirsch says that's why there has been a sharper pull back of building permits in Calgary than in Edmonton.

But he says both cities are down from where they were.

Expected to continue for several months

"With oil prices where they're at right now I think builders are going to be reluctant for quite a while. I wouldn't be surprised if building permits continued to sort of ebb lower over the next six months or so," said Hirsch.

"I would describe the level of pullback and what we're going to see in the future as kind of a healthy rebalancing of building contstruction."

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