Home starts, spending to dip: study
April 11, 2018
New home construction and renovation spending are both expected to dip this year but the downturn will be modest, according to the Conference Board of Canada.
Noting that 2017 saw the strongest residential sector in four years, a “small contraction” is forecast for the remainder of 2018, the Conference Board stated.
“Spending on new housing and renovations will likely slow this year as Canadians become more cautious under new mortgage rules and interest rate increases. This will put downward pressure on new residential construction,” said Michael Burt, director, industrial economic trends at the Conference Board of Canada.
Housing starts are forecast to drop by 2.9 per cent in 2018, led in large part by a 4.3 per cent drop in Toronto and a 6.5 per cent drop in Vancouver.
Renovation activity will perform better, but will also see a deceleration to 1.8 per cent growth in 2018 from 4.5 per cent last year.
However, Canada’s backlog of unsold new homes is falling. The diminishing supply of new homes will encourage building activity in the long run, propelled further by strong population growth in some regions and strengthening labour markets around the country, Burt suggests.
Contractors seeking more work could look to non-residential construction this year, the Conference Board noted, because this sector is expected to “bounce back” following a contraction in 2017.
Margins may be more generous since pre-tax profits in Canada’s non-residential construction industry are expected to rise by 8 per cent to reach $2.3 billion this year and then grow by around 6 per cent annually over the next four years.
The big driver will be industrial construction, such as distribution warehouses, and the many infrastructure projects supported by the federal government.