Canadian Builders can expect Lower Profits for Third Consecutive Year

Ottawa, Ont. - March 9, 2011— Canadian builders can expect a third consecutive year of lower profits in 2011 as spending on new homes declines, according to The Conference Board of Canada’s Canadian Industrial Outlook: Canada’s Residential Construction Industry - Winter 2011.
New mortgage lending rules, elevated levels of consumer debt, and anticipated mortgage rate increases are some of the factors restricting new home sales this year,” said Michael Burt, Associate Director, Industrial Economic Trends. “Demand will begin to pick up next year as the effects of lending policy changes fade. But housing starts are not expected to return to pre-recession levels of more than 220,000 units per year.”
Housing starts are expected to average 175,000 units this year, down from 190,000 in 2010. With starts not expected to return their pre-recession levels, renovations and repairs will account for a growing share of industry revenues. Growth in renovations and repairs spending is expected to outpace new home expenditures over the next four years.
Containing costs will continue to be an issue for the industry. Prices for building materials are on the rise and skilled trades shortages are expected to lead to above-average wage growth. Industry costs will dip by 2.3 per cent this year because of slower pace of building, but they will rise steadily beyond 2011.
Pre-tax profits are expected to fall by 5.3 per cent to $1.8 billion in 2011, their lowest annual level since 2004. Industry profitability will steadily improve beginning in 2012, but costs and competitive pressures are expected to keep margins tight over the next four years. www.conferenceboard.ca.