Building permits are a leading indicator in real estate

Building permits aren’t the sexiest measure of the strength of the real estate market, but they’re definitely one of the most important.

These municipality-issued documents provide legal authorization to begin construction of a building project, whether that’s a house, an apartment complex, an industrial building, retail spaces, government buildings, skyscrapers or even a backyard deck.

The more building permits issued and the higher their dollar value, the more confidence developers have in their ability to sell or lease out space in the buildings they want to construct.

“People are coming to Winnipeg all the time. They want to live in new buildings. They don’t want to live in old ones. The more selection the better,” said Boris Mednikov, broker/owner of Vanguard Real Estate and a board member with WinnipegREALTORS®.

Building permits are a leading indicator of the strength of the real estate sector, he said.

“If you see more building permits, there is more new construction and that means more jobs, more trades will be involved and more buildings materials will be sold. If there are no permits, nothing happens. You can’t start building without the permit,” he said.

“If they feel the market is weak, they will stop and wait until they see the market is better.”

Building permits tend to pick up in the spring and summer because that’s when it’s easiest to do construction work in cities such as Winnipeg. Building permits are still issued in the winter but in much smaller numbers.

Mednikov said he likes to gauge the real estate market by looking at building permits and several other indicators, including the number of available units and the number of offers on particular house and condo listings.

The cost of the building permit depends on what you’re going to build but Mednikov said a good ballpark is about $3,000.

According to Statistics Canada, there was $153.1 million worth of building permits issued in Winnipeg in February, down 25.9 per cent from $206.7 million for the same month in 2018. Canadian municipalities issued $7.8 billion worth of building permits in February, which was down 5.7 per cent from January. The decline was attributed to lower construction plans for multi-family dwellings.

Despite the drop in Winnipeg, it outperformed the province as a whole, which had $222.1 million of building permits issued in February, down 23.5 per cent from a year ago. This was driven by a 40 per cent decline in residential building permits, which were down from $192.9 million in February 2018 to $115.8 million this past February.

The biggest jump in the country occurred in Thunder Bay, which had $29.4 million in building permits in February, up a whopping 484 per cent from $5 million in February last year. Saguenay had the biggest drop, falling 64 per cent from $38.1 million this past February to $13.7 million a year earlier.

Published By Geoff Kirbyson This email address is being protected from spambots. You need JavaScript enabled to view it. on 04 / 12 / 2019

Retrieved from Winnipeg Real Estate News on 04/12/2019