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Will Quebec Bounce Back Further?

By Charlie Blore

The Quebec housing market has been experiencing something of a slow burn over the last year or so — which may not be so bad given the alternatives. While other parts of the country have seen sharp declines in activity over the last year, stemming from the global
economic downturn, Quebec’s housing market has seen a slower, more gradual decline. But the news isn’t all good in la Belle Province, because, while the rest of the country embarks on their respective roads to recovery, the outlook isn’t as bright in Quebec.
“The difference in Quebec is that in the long run the demographics suggest we should see a continual decline in new home starts for a long period of time — about 15 to 20 years,” says Daniel Laplante, director of economic and governmental affairs for the Association Provinciale des Constructeurs D’habitations du Quebec (APCHQ).
The Canada Mortgage and Housing Corporation reported that July starts came in at 38,000 on a seasonally adjusted annualized basis. That’s well up from 2009 lows reached in February, and actual starts for the month were down just eight per cent year-over-year. The rebound may be losing steam though; the APCHQ is projecting annual starts of 40,100 units for 2009, which is more or less the current pace of construction and would be 16 per cent fewer than the province produced in 2008.
The market is being weighed down by the city of Montreal and growing labour market woes. Montreal starts between January and June of this year were 26 per cent lower than in 2008. Unemployment, meanwhile, now sits at nine per cent, the highest level Quebec has seen since 2004. Sales are also expected to drop to 2004 levels, with roughly 70,000 units expected to change hands. These factors along with a number of others, including a backlog of inventory, are expected to continue to weigh down starts through 2010: the APCHQ is projecting 39,928 starts next year.
“Despite the fact that interest rates are relatively low at the moment, there’s one thing we can’t forget, which is that there’s been a decline in wealth from this economic downturn that in the near term will slow the new home market,” says Laplante.

Government Incentives Provide Some Help
As has been the case in much of the rest of the country, the Quebec renovation market has fared better than its new start counterpart. Québec City and Montreal both indicated that the number of households having completed renovations in 2008 increased by two per cent. Several reasons account for this, most notably an aging existing stock of houses. This, paired with an aging population, has Daniel Laplante thinking renovators should see a further appreciation in their business as homeowners turn to professionals to complete the projects they no longer can themselves.
“I think there will be an opportunity to be seized by our entrepreneurs in terms of renovations, and a helping hand from the state could allow the industry to maintain its employment levels,” says Laplante.
Government incentives have already been key in generating work for renovators. The provincial government is currently offering to credits to cover 20 per cent of homeowners’ expenses, up to a maximum of $2,500, and this is not including the federal Home Renovation Tax Credit.
With growth in the new home sector expected to be slow in the next housing cycle, the province’s renovation market should be in a position to blossom.

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