The decline in building permits shows the long-awaited slowdown in the Canadian housing market may be materializing, but any downturn should prove moderate by historical standards, says RBC Financial Group.

Statistics Canada said Wednesday that the value of building permits taken out by builders in May dropped 9.5%, a nine-month low. Residential permits fell 12.7% while non-residential permits fell 2.7%. By far the most important decline occurred in multi-family dwellings where a 30% drop was recorded. Single-family permits fell by a much more modest 3.1%, although this represents the fourth such decline so far this year for this most important component of the housing market.

John Anania, assistant chief economist, with RBC, noted in a report that most of the weakness was located in Ontario where housing permits fell 27.9%, while Alberta recorded the largest gains on the back of single-family permits. Most large metropolitan centres fared poorly, with total permits in Toronto recording a 32.1% decline, Montreal a 10% decline and Calgary a 30.4% decline. Ottawa and Vancouver were the exception, eking out some small increases.

“Today’s permits data cast a shadow over the release of June housing starts on the broader housing sector,” Anania said. “However, as is the case with the U.S. housing sector, the coming downturn in the housing market should prove moderate in comparison to other historical periods of contraction since builders have been cautious given the level of demand in the last few years.

“So, while we do expected construction to decline, as foreshadowed by today’s permits release, it will pall in comparison to the experience of the last real estate downturn.”