08/07/2012 08:43 EDT | Updated 10/07/2012 05:12 EDT

Canada Building Permits June 2012: Value Falls 2.5 Per Cent, Statistics Canada Says

In this Wednesday, June 20, 2012, photo, a worker stands in the early-morning sunlight on a home construction project in Newtown, Pa., Wednesday, June 20, 2012. U.S. builders broke ground on the most new homes and apartments in nearly four years last month, the latest evidence of a slow housing recovery. The Commerce Department said Wednesday that housing starts rose 6.9 percent in June from May to a seasonally adjusted. annual rate of 760,000. That's the highest since October 2008. (AP Photo/Mel Evans)

OTTAWA - Residential construction intentions remained robust in June despite an overall decline in building permits, largely due to reduced activity in the government sector, Statistics Canada reported Tuesday.

Overall, building permits declined a less-than-expected 2.5 per cent to $6.8 billion in June, only partly reversing the 7.1 per cent jump of the previous month.

But almost all the loss was due to a 54.9 per cent tumble in institutional building intentions to $519 million, partly taking back the 72 per cent gain in May. That drop-off was concentrated in steep declines for government buildings in British Columbia and for medical facilities in Alberta, the agency said.

The big surprise was that residential construction intentions — the backbone of the construction industry — remained expansive.

Residential building permits rose for the second consecutive month to 4.2 per cent to $4.4 billion in June, with Ontario leading the way with a 18.3 per cent increase. For the year, residential construction is up 15.8 per cent.

"That was certainly a bit of surprise," said economist Peter Buchanan of CIBC World Markets, noting that recent headlines had pointed to a cooling in the housing market.

"This would seem to suggest that residential construction added to growth in the second quarter and probably the third quarter as well."

Last week, the Real Estate Board of Greater Vancouver reported sales of previously owned properties dropped 18.4 per cent in July from a year earlier, while the Toronto board said sales had slipped 1.5 per cent during the same period, with condo sales falling 10 per cent.

Most of the bad news for June was on the non-residential side.

Contractors took out $2.5 billion worth of permits in the non-residential sector, down 12.3 per cent, with the decrease concentrated in the institutional sector, particularly in B.C. and Alberta.

Commercial building permits was up 6.8 per cent, while industrial construction was largely unchanged.

The total value of building permits was down in seven provinces in June, with Alberta and British Columbia posting the biggest drops.

The value of building permits fell in 22 of the 34 census metropolitan areas in June, with Vancouver, Calgary and Edmonton experiencing the largest declines.

Buchanan said all indicators point to a softening on the residential side as well going forward, given that household debt is at record levels and that tighter mortgage rules that went into effect last month have not had time to impact the system.

"If you look at the pace of housing starts in Canada they are still running well above the demographically sustainable rate of 170,000 to 180,000," he explained.

"So we have not changed our view that we will see some softening, we just we haven't seen it to this point."

Also on HuffPost

Photo gallery Most Expensive Houses For Sale In Canada - June, 2012 See Gallery