British Columbia
Construction & Landscaping Network

Search BCdex | Advertise | List Your Company | B.C. Weather | Terms & Conditions | Games

Construction & Landscaping News Archives

 

August 2007

Current News

Office Construction Activity Yields Record Profits - August 23, 2007

After more than three years of growth, profits in Canada's non-residential construction industry are expected to peak at $2 billion in 2007, according to the Conference Board's Canadian Industrial Outlook: Canada's Non-Residential Construction Industry - Summer 2007.

"Construction of office buildings, especially in Alberta and Ontario, is the main reason for the record financial performance in recent years," said Valerie Poulin, Economist. "However, rising material and labour costs are starting to trim builders' profit margins. Since labour accounts for a third of all costs, the tight labour market is of particular concern for the industry."

Solid economic growth is pushing office vacancy rates down and spurring construction activity, leading to record price increases last year and this year. Both revenues and costs rose by more than 20 per cent in 2006, and are forecast to increase by more than 10 per cent this year. In 2007, revenues will again rise faster than costs, as they have for the past two years.

Growth in demand for new construction is forecast to ease slightly in the next two years. Meanwhile, labour and material costs will increase faster than revenues beginning in 2008. Profit levels are expected to fall every year through 2011, but they will still be considered high by historical standards.

As it is too early to assess the impact of the sub-prime mortgage crisis on the overall economy, the current uncertainty is not included in the outlook for Canada's non-residential construction industry.

Housing Costs Drive Up CPI - August 21, 2007

Consumer prices rose 2.2% in July compared with July 2006, identical to the increases of the three previous months according to a report issued this morning by Statistics Canada.

For the fourth straight month, most of the average growth in consumer prices was attributable to costs associated with owned accommodation (+4.8%). Declines in prices for gasoline and computer equipment and supplies dampened the upward pressure on average prices. The all-items index excluding energy rose 2.5% from July 2006 to July 2007, faster than in June (+2,2%). The Bank of Canada's core index advanced 2.3% in July after posting a 2.5% increase in June. This index is used by the Bank of Canada to monitor the inflation control target.

The 12-month rise in the Consumer Price Index (CPI) was mainly due to higher costs for owned accommodation and, to a lesser extent, food. For the fourth straight month, owned accommodation costs were the main contributor to the year-over-year increase in the CPI. The component that contributed the most to the increase of owned accommodation costs was mortgage interest cost, which rose 6.0%, faster than in June (+5.7%). This was the highest rate of growth posted since December 2000.

Higher mortgage rates fuelled the increase in mortgage interest cost. In previous months, the growth in mortgage interest cost had been mainly attributable to higher prices for new homes.

Homeowners' replacement cost also contributed to the increase in the CPI in July. This component, which represents the worn-out structural portion of housing and is estimated using new housing prices (excluding land), increased 6.2% between July 2006 and July 2007. This was up slightly from the 6.1% increase observed in June, a second consecutive acceleration for this component following eight months of slowdown.

Record Profits Expected in Construction - August 15, 2007

After posting record profits in 2006, builders can expect profits to climb even higher to $4.5 billion in 2007, according to the Conference Board's Canadian Industrial Outlook: Canada's Residential Construction Industry - Summer 2007.

"Strong growth in new home prices allowed profits to reach record levels last year and continues to boost profits in 2007," said Valérie Poulin,Economist. "With price growth and demand for new construction both moderating, profits are expected to fall from their 2007 peak, but will still remain high by historical standards."

Solid demand has been a key factor driving up prices. However, demand for new homes has not been uniform across Canada. Although residential construction continues to grow robustly in the West, housing starts fell in central Canada and parts of Atlantic Canada in 2006.

Demographic trends also suggest some softening in Canadian housing demand. Low population growth is expected to limit demand for new home construction.
In recent years, renovations and repairs has been a growing segment of the residential construction industry. Although spending on renovations is expected to ease over the forecast period, it will be the main driver of growth in the industry through the expected downturn in housing starts in 2007and 2008.

Housing Starts Expected to Continue Cool-Off - August 15, 2007

Housing starts will moderate in 2007, reaching 220,000 units, a decrease of 3.2 per cent from 2006, according to Canada Mortgage and Housing Corporation’s (CMHC) third quarter Housing Market Outlook, Canada Edition report. Residential construction will continue to decline in 2008 to 207,200 units, yet will mark seven consecutive years in which housing starts exceed 200,000 units.

“Despite high employment levels, income gains and low mortgage rates, housing starts will trend downwards in 2007,” said Bob Dugan, Chief Economist at CMHC. “The slight pull back in housing starts this year and next will be mainly due to the continued growth in house prices coupled with modest increases in mortgage rates. The level of new home construction will decrease in all provinces except for Manitoba, Quebec, and Saskatchewan.”

Existing home sales, as measured by the Multiple Listing Service (MLS®)1, will register their best year on record with 514,450 units in 2007, a 6.5-per-cent increase over 2006. The record activity in the Prairies will be a key factor leading to the increase in the national level of MLS® sales compared to the previous year. The level of MLS® sales is expected to reach 494,750 units in 2008, its second highest level on record. Growth in the average MLS® price will remain high at 9.9 per cent in 2007 mainly because of continued strong price pressures in Western Canada. As most resale markets move toward more balanced conditions, growth in average MLS® price is forecast to slow to 5.2 per cent in 2008.

At the provincial level, British Columbia home starts will remain above historical averages but will decline slightly. Income growth, a tight labour market, and high levels of consumer confidence will help to offset the dampening effect of rising mortgage carrying costs on the demand for new and existing homes in British Columbia. Housing starts will decline slightly from 36,443 units in 2006 to 35,525 units in 2007, and continue to ease to 32,500 units in 2008. The average MLS® price in British Columbia will grow by 11.7 per cent in 2007 and by 6.3 per cent in 2008 as increased listings and fewer resales bring supply and demand for existing homes into more balance.

Despite the record low unemployment rate and abundance of job opportunities, Alberta will see a net drop in migrants over the next two years due to the growing difference in provincial house prices and improved economic performances elsewhere across Canada. With lower migration and higher mortgage carrying costs, housing starts will ease from 48,962 units in 2006 to 47,300 units in 2007 and 44,500 units in 2008. Despite the decline in housing starts, 2007 will be the third best year on record. Following an unprecedented 30.7 per cent gain in 2006, the average MLS® price is expected to climb another 26.1 per cent in 2007 and 9.7 per cent in 2008.

In Saskatchewan, steady economic growth, a healthy employment situation and gains in net migration have contributed to the strong housing demand. Total housing starts are forecast to reach 5,700 units in 2007, the highest level in 24 years. Escalating costs will push housing starts down to 4,900 units in 2008, making it the second highest level of starts since 1986. The average MLS® price in Saskatchewan will rise by 24.2 per cent and 10.4 per cent in 2007 and 2008, respectively.

In Manitoba, economic growth will exceed the national average, contributing to a five-year high in job creation, thus increasing net migration to levels not seen since 1982. These factors will contribute to the high levels of new home construction expected over the next two years. Total housing starts will reach 5,500 units in 2007, the best performance in 20 years, and will edge lower to 5,250 units in 2008. The average MLS® price in Manitoba will rise by 11.2 per cent and 7.5 per cent in 2007 and 2008, respectively.

An improving economic outlook in Ontario will help sustain a high level of housing demand across the province. New home construction activity will moderate over the next two years but remain near historical averages. Housing starts will decline from 73,417 units in 2006 to 66,950 units in 2007 and to 64,500 units in 2008. The average MLS® price in Ontario will rise by 5.3 per cent and 3.4 per cent in 2007 and 2008, respectively.

Continued steady economic growth in Quebec, coupled with solid job creation, will cause housing starts to increase from 47,877 units in 2006 to 48,100 units in 2007. Starts in Quebec will slide to 45,000 units in 2008. Thanks to the strong resale market, the average MLS® price growth in Quebec will be 6.2 per cent in 2007 and 2.2 per cent in 2008.

In New Brunswick, the positive labour market conditions will help reduce the net outflow of interprovincial migrants in 2007 and 2008. Nevertheless, rising mortgage carrying costs and more choice in the resale market will result in lower levels of new home construction. Housing starts are forecast to decline from 4,085 units in 2006 to 3,750 units in 2007 and 3,625 units in 2008. The average MLS® price in New Brunswick will rise by 6.4 per cent and 3.5 per cent in 2007 and 2008, respectively.

In Nova Scotia, slower employment and population growth, coupled with higher personal debt levels will constrain new home construction activity over the next two years. Housing starts are forecast to ease from 4,896 units in 2006 to 4,475 units in 2007 and to 4,300 units in 2008. The average MLS® price in Nova Scotia will rise by 5.5 per cent and 3.4 per cent in 2007 and 2008, respectively.

Prince Edward Island’s economy is expected to expand at a modest pace over the two coming years, and employment will continue to grow by less than one per cent per year. As a result, housing starts will decline from 738 units in 2006 to 625 units in 2007 and 590 units in 2008. The average MLS® price in Prince Edward Island will rise by 3.0 per cent and 2.6 per cent in 2007 and 2008, respectively.

In Newfoundland, higher homeownership and construction costs and lower employment growth will dampen housing demand over the next two years. Housing starts will move lower from 2,234 units in 2006 to 2,100 units in 2007 followed by a decrease to 2,025 units in 2008. The average MLS® price in Newfoundland will rise by 0.7 per cent and 1.2 per cent in 2007 and 2008, respectively.

Renovation spending will continue its upward trend through to 2008 thanks to strong growth in the Canadian economy, low mortgage and interest rates, and a solid housing sector. In 2007, renovation spending will increase by 9.8 per cent to reach $49.9 billion. As activity in the resale market begins to slow, growth in renovation spending will ease to 6.8 per cent in 2008 to reach $53.3 billion.

Apartment Construction Prices Jump in Q2 - August 15, 2007

The composite price index for apartment building construction was 154.1 (1997=100) in the second quarter of 2007, up 3.2% from the previous quarter and up 10.2% from the second quarter of 2006 according to a report released this morning by Statistics Canada. The quarterly increase was mostly the result of higher labour and materials costs and a strong market for building construction, particularly in Western Canada. Also, the year-to-year advance was the largest since the index was first published in the first quarter of 1988.

Western Canada recorded the highest quarterly increases, led by Edmonton (+5.3%), followed by Calgary (+4.5%) and Vancouver (+4.1%). Lower price rises were observed in Eastern Canada, with Montréal recording an advance of 2.6%, followed by Toronto (+2.3%), Ottawa–Gatineau, Ontario part (+2.2%) and Halifax (+1.9%).

Calgary (+23.4%) experienced the highest gain over the second quarter of 2006, followed by Edmonton (+20.9%), Vancouver (+15.7%), Toronto (+6.5%), Ottawa–Gatineau, Ontario part (+5.7%), Halifax (+5.3%) and Montréal (+4.2%).

New Housing Price Increases Continue to Fall - August 9, 2007

For the eighth straight month, the increase in new housing prices continued to slow, with contractors' selling prices increasing 7.8% from June 2006. This is compared with the 8.6% year-over-year increase in May. On a monthly basis, prices in June were up 0.7% from May, while the June New Housing Price Index reached 153.1 (1997=100).

A Statistics Canada report shows that Saskatoon's new housing market continued to experience strong growth, setting another record year-over-year increase (+48.4%). Regina also felt the effects of a hot housing market, posting a record increase of 22.5% over June 2006.

In Alberta, new housing price inflation continued to fall. Prices in Edmonton receded from their plateau with a 31.9% increase, down from a high of 42.8% in November 2006. Calgary's year-over-year increase (+14.7%) continued to moderate from its historic highs recorded in 2006.

A shortage of serviced lots and increased costs of developing land contributed to an 11.5% increase in new housing prices in Winnipeg, while a robust market in Vancouver pushed prices up 9.6%.

Hamilton remained strong, registering a 5.7% year-over-year increase, followed closely by London (+5.2%). A healthy market was cited as a factor behind the rise in both census metropolitan areas (CMAs).

Windsor (-2.3%) remained the only CMA where new housing prices declined. According to homebuilders, this decrease was due to competitive pricing in a weak market.

Despite posting no monthly increase, Halifax prices were 7.1% higher than in June 2006, the largest increase of all Maritime CMAs.

On a monthly basis, Saskatoon showed the highest value with an increase of 8.8%, followed by Winnipeg (+5.2%) and Regina (+1.9%).

Housing Starts Continue to Fall - August 9, 2007

The seasonally adjusted annual rate of housing starts was 215,600 units in July, down from 225,300 units in June, according to Canada Mortgage and Housing Corporation (CMHC).

“Housing starts in July continued their gradual decreasing trend as both multiple and single-detached starts declined,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “The lower level of housing starts this month is consistent with our forecast of a gradual easing in the pace of new home construction in 2007 caused by rising prices and slightly higher mortgage rates.”

The seasonally adjusted annual rate of urban starts decreased 5.7 per cent to 181,800 in July, compared to June. Urban singles were down 2.7 per cent to 89,700 units in July, while multiple starts decreased 8.4 per cent to 92,100 units.

In July, seasonally adjusted urban starts decreased in four out of five regions. Urban starts registered an increase only in Ontario where they rose by 4.6 per cent. There was a decrease of 12.8 per cent in Quebec, 9.3 per cent in the Prairies, 8.1 per cent in British Columbia, and 3.8 per cent in the Atlantic region. Urban single starts were up in Ontario (2.8 per cent) and the Atlantic (6.4 per cent), while urban multiple starts declined in all regions except for Ontario, where multiple starts increased 6.9 per cent.

Rural starts were estimated at a seasonally adjusted annual rate of 33,800 units in July.

Actual starts, in rural and urban areas combined, were down an estimated 4.8 per cent in the first seven months of 2007 compared to the same period in 2006. In urban areas, actual total starts fell an estimated 6.0 per cent year-to-date with both single and multiple starts declining by 6.7 per cent and 5.2 per cent, respectively.

No Let-Up in Construction Intentions - August 3, 2007

Construction intentions maintained their sizzling pace on a national basis this spring, as the value of building permits issued followed a record-breaking month in May with another strong showing in June according to a report released this morning by Statistics Canada. The back-to-back performances point to very busy construction sites in the coming months.

In total, municipalities issued $6.9 billion worth of building permits in June, down only 0.4% from May. The figure for June was the second-highest on record, surpassed only by the peak in May.

Gains in the residential sector were offset by declines in non-residential construction intentions. Non-residential permits declined 10.0% to $2.8 billion as all three components (industrial, commercial and institutional) of this sector fell. Again, this level was second only to the record-high performance in May.

In the residential sector, intentions climbed 7.4% to more than $4.1 billion. This is only the second time residential permits have surpassed the $4-billion mark, the first time having occurred in December 2005.

The demand for new dwellings remained notably strong as a total of 21,515 new dwelling units were approved in June, a number surpassed only twice since 1990.

The second quarter of 2007 was the highest on record for the total value of building permits, with construction intentions reaching $19.5 billion, up 13.6% from the first quarter of 2007. Strong quarterly growth was recorded in both the residential (+12.9%) and non-residential (+14.5%) sectors.

Housing sector: Multi-family permits provide boost

Municipalities approved multi-family permits valued at $1.6 billion, a 14.2% increase from May and the second-highest level on record. The number of multi-family units approved rose 18.3% to 11,726, continuing the upward trend that started in January.

Single-family permits increased 3.3% to $2.5 billion, the highest level on record. The number of single-family units authorized crept up 0.5% to 9,789. Single-family units approved have been trending upward since May following a decline that started in September 2006. Strength in employment, growth in disposable income, tight apartment vacancy rates in several centres and attractive financing options continued to stimulate the demand for housing.

Residential permit values increased in only three provinces. The large gains in Alberta and Ontario were sufficient to set the stage for an overall increase in residential permit values despite declines in seven provinces. Residential permits rose 46.4% in Alberta to a record $983 million, propelled by a 166.3% increase in the value of multi-family permits. Several large projects for apartments/condominiums were behind this strong gain. Single-family permits also increased significantly.

In Ontario, residential permits were up 9.2% to $1.3 billion, buoyed by a 25.0% jump in the value of multi-family permits.

Significant ground was ceded in British Columbia, where permit values dropped 12.6% to $808 million, owing to a large drop in the value of multi-family permits. The decline in this component was due largely to a decrease in the average value of multi-family units approved.

On a quarterly basis, residential permit values increased in seven provinces in the second quarter. Nationally, permit values for both single-family (+3.8% to $7.1 billion) and multi-family (+31.4% to $4.5 billion) units posted new record quarterly values, boosting the total value of residential permits 12.9% over the first quarter to $11.6 billion.

Non-residential construction intentions remain very high

The value of non-residential permits declined in June from an exceptionally high level, as demand for office space in Calgary had inflated the results in May. Despite a 10.0% decline, the $2.8 billion worth of non-residential permits issued in June was the second-highest level on record.

When Alberta is excluded from the national figures, the value of non-residential permits increased 13.4% in June.

Significant gains were recorded in five provinces. Ontario recorded the most significant increase (in dollars) among the provinces, as a jump in commercial permits more than offset decreases in the industrial and institutional components.

For both British Columbia and Nova Scotia, the level in June was the second-highest on record, thanks to advances in all three non-residential components. In Quebec, the large increase in institutional permits led the value of non-residential permits to its highest level since March 1998.

In Saskatchewan, the level reached in June was the highest in nearly 18 years, thanks to commercial permits.

Construction intentions in the commercial component reached $1.8 billion in June, the second-highest level on record, after peaking at $2.1 billion in May. Several large projects spread across a wide variety of buildings, such as recreation buildings, office buildings, hotels, retail and warehouse buildings, contributed to the strong showing.

The value of commercial permits has been on an upward trend since the end of 2005, and the recent strength in the results is largely consistent with the very dynamic retail sector, the declining vacancy rates for offices as well as the strong corporate profits.

Following a 78.6% jump in May, the value of institutional permits decreased 4.8% in June to $592 million. Despite the decline, this level remained 11.4% higher than the average monthly level observed since the beginning of 2007. A gain in the value of permits for schools failed to offset the declines in projects for medical buildings and nursing homes.

In the industrial component, the value of permits declined 7.4% to $403 million, after a 26.1% gain in May. The decline came from fewer investment projects for manufacturing buildings. The value of industrial permits has been on a declining trend since the end of 2006. This result is consistent with the challenge that manufacturers face with the appreciation of the Canadian dollar.

On a quarterly basis, the value of commercial permits jumped to its highest quarterly level on record ($5.2 billion) in the second quarter, increasing 32.9% from the first quarter. The quarterly values of industrial (-15.2% to $1.2 billion) and institutional (-4.0% to $1.6 billion) permits declined over the same period.

Metropolitan areas: Value of permits in Calgary remains high

Among the 34 metropolitan areas, 19 recorded declines in their total value of building permits. The largest declines occurred in Calgary, after the value of permits in this area had surpassed the $1-billion mark in May. With a total of $697 million in permits issued, June's level was the second-highest on record.

The ground lost in Calgary was compensated for by rises in Toronto and Edmonton, thanks to gains in both the residential and non-residential components for each area. Significant increases also occurred in Montreal and Regina.

The values of permits in Edmonton and Regina both reached new record highs in June.

 

Stay healthy with herbal remedies
Find out how to improve your gas mileage