By The Canadian Press

Construction activity is expected to remain healthy this summer even after the value of building permits fell 21 per cent in April as the decline followed a particularly strong March, economists say.

Statistics Canada reported Monday that building permits fell to $5.3 billion after increases in February and March on a slide was in both the non-residential and residential sectors.

Economists had expected an average seven per cent drop.

The disappointing April figures followed a March that saw municipalities issue $6.8 billion in building permits, the highest figure since June 2007.

The value of non-residential permits fell 33.2 per cent to $1.9 billion in April after permits were issued for a number of big projects in March. Residential permits came in at $3.5 billion, down 12.6 per cent.

Building permits are a signal of contractors’ intentions and foretell trends in the housing and construction markets. But the monthly data is volatile and must be examined on a longer-term basis to draw any conclusion about the underlying trend, said Capital Markets economist David Madani.

“We can expect fairly active construction activity in both non-residential and residential sectors over the summer,” he said.

“When you consider the work that’s under construction now and the permits that are in the pipeline, we can expect pretty active construction activity in the summer — I think that’s pretty much in the bag.”

But Madani said he does see trouble down the road because Canadian home prices are substantially overvalued.

“We’re of the opinion that we’ve simply built too many homes,” Madani said.

The housing market has been slowing in many parts of Canada and in some cities, an over built condominium sector — especially in big cities like Toronto and Vancouver — has also started to weigh down the market.

CIBC World Markets analyst Emanuel la Enenajor emphasized the weakness in the report.

“In particular, the softness in residential permits continues to suggest homebuilding activity will ramp down this year, with roughly a 10 per cent drop in housing starts for 2011 from the prior year,” Enenajor wrote in a note.

BMO Capital Markets senior economist Sal Guatieri said one month of permits doesn’t make a trend.

“We are not seeing — at least in most regions — overbuilding of housing units,” he said in an interview.

“So, that’s good, because if demand does fall off in response to higher interest rates, we won’t see a glut of unsold homes sitting on the market depressing prices,” he added.

However, he noted the data suggested non-residential construction is cooling off after activity soared 14.4 per cent in the first quarter of the year.