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Non-Res Construction Continues Declines in Q3 - October 16, 2009

Investment in non-residential building construction reached $10.4 billion in the third quarter, down 3.9% from the second quarter says a report released this morning by Statistics Canada. This was the third consecutive quarterly decrease attributable largely to lower spending on commercial and industrial building construction.

Investors injected $6.0 billion into commercial projects, down 7.5% from the second quarter. For the industrial component, investment fell 8.8% to $1.1 billion. In contrast, spending in the institutional component continued to rise, up 5.5% to $3.3 billion.

Of the six provinces that posted decreases in the third quarter, Alberta, Ontario and British Columbia reported the sharpest drops, mainly as a result of lower spending on commercial construction. In contrast, New Brunswick posted the strongest quarterly increase, as a result of higher spending in the institutional and commercial components.

Investment fell in 17 of the 34 census metropolitan areas. The most pronounced decreases were in Toronto, Vancouver and Calgary, mainly because of the decline in commercial construction projects. Ottawa–Gatineau (Ottawa part) posted the most substantial growth in the third quarter, with investment rising by 4.8% to $309 million. This increase was attributed to gains in all three components.

Decrease in the commercial component

Investment in the construction of commercial buildings declined for the third consecutive quarter. This decrease was the result of lower spending in Alberta, Ontario and British Columbia for office buildings, shopping centres and warehouses.

While nine provinces recorded decreases in commercial investment, the most significant declines occurred in Alberta (-13.2% to $1.4 billion), Ontario (-6.5% to 2.2 billion) and British Columbia (-10.8% to $785 million).

In contrast, New Brunswick, the Northwest Territories and Yukon showed increases in the commercial component, principally as a result of higher spending on office building construction.

Decline in the industrial component

Spending in the industrial component was down for a fifth consecutive quarter, in the wake of lower spending on the construction of manufacturing plants and utilities buildings in eight provinces.

Provincially, the most substantial contributions to the quarterly decline were those recorded in Alberta, where investment fell 19.9% to $216 million, and in Quebec, where it was down 13.1% to $250 million.

However, Manitoba and Nova Scotia posted strong increases in the third quarter, mainly because of higher spending on the construction of buildings for the primary sector.

Growth in the institutional component

Spending in the institutional component was up for a seventh consecutive quarter, mainly as a result of higher investment in educational institutions in eight provinces and the Northwest Territories.

Alberta showed the largest gain, as a result of higher spending on health and educational institutions. In Quebec, higher investment in the construction of educational institutions more than offset the declines observed in the other categories of institutional buildings.

In contrast, Ontario posted the sharpest drop. This decrease was largely explained by lower spending on the construction of health care facilities and homes for the aged.

Contractors Selling Prices Still Down - October 13, 2009

While some advancement was made in contractors selling prices in August, prices are still down comparing year to year. Statistics Canada says that contractors' selling prices increased 0.1% in August following a 0.3% advance in July.

Between July and August, prices increased the most in St. John's (+1.1%) followed by Québec (+0.9%) and Regina (+0.8%). In St. John's, some builders adjusted prices upward to be more in line with the value of land within the city.

In Québec, prices continued to increase as builders reported higher material and labour costs. Builders moving to new phases of development also raised their prices as the scarcity of available lots has been pushing up land value in this region.

The largest monthly decrease in new housing prices was recorded in Hamilton (-0.5%). Some builders lowered their prices to encourage sales while others offered bonus upgrade packages. Monthly declines were also observed in Windsor (-0.4%) and Edmonton (-0.3%).

Year over year, the New Housing Price Index was down 3.1%. The largest declines remained in Western Canada, where prices decreased from highs registered in late 2007 and the beginning of 2008. In the Prairie region, 12-month declines were recorded in Edmonton (-11.4%), Saskatoon (-7.6%) and Calgary (-6.3%).

On the West Coast, Victoria (-10.0%) and Vancouver (-7.8%) also posted year-over-year declines. Over the past few months, some builders in Alberta and British Columbia have offered lower prices, bonuses and incentives to motivate sales in the face of weaker market conditions.

Among surveyed cities, the largest year-over-year increase was registered in St. John's (+7.5%). This was the 10th consecutive month that this city has led the way in year-over-year advances. On a year-over-year basis, prices in Québec (+6.3%) and in Saint John, Fredericton and Moncton (+2.2%) increased, albeit at a slower pace than in previous months.

Compared with August 2008, contractors' selling prices were 1.8% higher in Regina. Charlottetown (+1.7%) and Winnipeg (+1.6%) also posted increases.

Single Family Home Starts on the Increase - October 8, 2009

The seasonally adjusted annual rate of housing starts across the country reached 150,100 units in September compared to 157,300 units in August, according to Canada Mortgage and Housing Corporation (CMHC).

“The decline in housing starts in September is attributable to the volatile multiple starts segment,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “However, starts of single homes, which are a barometer of the trend in housing markets, climbed in September to reach their highest level so far this year. The rebound in existing home sales and the upward trend in new home construction, support our expectation that housing demand has strengthened and that housing starts will be stronger in the second half of 2009.”

The seasonally adjusted annual rate of urban starts declined by 5.2 per cent to 131,500 units in September. Urban multiple starts decreased by 21.4 per cent to 62,700 units, while urban single starts moved up 16.8 per cent to 68,800 units in September.

September’s seasonally adjusted annual rate of urban starts increased by 11.8 per cent in Ontario, decreased by 20.2 per cent in Quebec, by 18.1 per cent in British Columbia, and by 4.7 per cent in the Atlantic, and was unchanged in the Prairies.

Rural starts were estimated at a seasonally adjusted annual rate of 18,600 units in September.

Vancouver Housing Prices Up 14% Since January - October 8, 2009

The Royal LePage House Price Survey released today showed the average price of homes in Metro Vancouver has nearly recovered to the highs seen in 2008 although West Vancouver prices pulled down the average with year-over-year price declines of 5 per cent.

According to Chris Simmons, President of Royal LePage Westside, average residential real estate prices are moving up across the region. "We're playing catch up for the previous slow period. The average selling price in Q3 is almost where it was last year. We're seeing a correction caused by pent-up demand."

While Vancouver's key housing types saw price increases between Q2 and Q3, home values were still down compared to the third quarter of 2008. The average price of a detached bungalow dropped 1.8 per cent year-over-year to $802,500, standard two-storey homes declined 2.3 per cent to $904,750, but standard condominiums were up 0.7 per cent to $445,500.

With third-quarter inventory approximately two-thirds of 2008 levels, homes are typically selling at or above asking price, and multiple offers are common. Single family homes are particularly scarce, Simmons said.

August 2009 was a particularly active month, with twice as many condominiums and three times as many single family homes sold in Metro Vancouver over the same period last year. "People are over the shock of the economic crisis that occurred last October, so we're seeing renewed confidence in the economy. Plus, low interest rates were important drivers."

Looking at the North Shore, well-priced homes are a sought-after commodity. "Sales are driven by first time buyers and the current low interest rates," said Bill Binnie, Vancouver President, Royal LePage North Shore. "The average West Vancouver price is over a million dollars, so sales are typically slower. But a well-priced, clean house in a prime West Vancouver neighbourhood is guaranteed to generate multiple offers."

Meanwhile, Victoria's year-over-year average home prices are down 5.5 per cent, but sales volume is up. Detached bungalows bucked the price trend with a 5.9 per cent year-over-year increase.

Year-over-year inventory is down 25 per cent, and sales volume is up across the board: 43 per cent for single family homes, 40 per cent for condominiums and 50 per cent for townhomes. "The biggest surprise is how quickly the market has recovered," says Carol Geurts, Managing Broker for Royal LePage Coast Capital Realty. "First time buyers are a factor, but Victoria is a special market. It's a destination of choice, particularly for people moving from eastern Canada."

Most listings are still selling below asking price, but bungalows are a hot commodity. "Overall, consumer confidence is coming back to the market," she says. "People aren't sitting on the fence anymore; they're committing to purchases."

Detached bungalows in the $600,000 range - particularly those with rental suits - are generating multiple offers. "Mortgage helpers are attractive to buyers, and there is a large demand for rentals, partly because of the university. Victoria almost has a zero vacancy rate."

Inventory fell throughout Q3, and Geurts expects inventory will continue to tighten in the fourth quarter. "Activity is still strong, and we are not into the slow period of the year yet. The weather is still beautiful, and people are still excited about shopping for homes."

Overall Canada's housing market is on the road to recovery, but despite the strength of the market in the third quarter, giving the appearance of a surge in real estate activity, Royal LePage cautioned that sales activity is following the normal cycle albeit lagging approximately one month behind the typical seasonal pattern in year-to-date analysis.

"The economic recession interrupted the flow of the real estate cycle but it is essentially back on track," said Phil Soper, president and chief executive officer, Royal LePage Real Estate Services. "There is the illusion of a boom in the market, but in fact what we are experiencing is the end of a normal, short-term correction. Once housing supply returns to normal levels, we believe the economy will support modest pricing growth into 2010."

Consumer Confidence Picks Up in U.S. - October 8, 2009

New home construction is driven by increased population, the B.C. population is largely affected by the health of our forest industry and our forest industry is heavily dependant on demand for our lumber in the U.S. There is news today indicating that consumer confidence in the U.S. is on the increase.

Propelled by diminishing concerns about current personal finances and job security, U.S. consumer sentiment reached a twelve-month high in October, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index. Gains were made in every facet of consumer sentiment, with overall consumer confidence climbing 11.8 points. As a result, the RBC Index stands at 51.8 this month, compared to 40.0 in September. This marks a 50-point improvement over the all-time low of 1.6 observed in February 2009.

"Federal Reserve Chairman Ben Bernanke's assertion three weeks ago that the recession is over, together with a lack of negative financial news since then, have had a galvanizing effect on consumer sentiment," said RBC Capital Markets U.S. economist Tom Porcelli. "Although the trends are moving in the right direction, consumer confidence remains fragile, and unexpected bad news about the economy or markets could once again send sentiment spiraling downward."

The RBC Investment Index increased sharply this month, climbing 21.1 points to 58.0 - the highest mark for the Investment Index this year. Pessimism has declined significantly since mid-summer, with the number of Americans who report they feel less confident in their ability to make investments for the future dropping to 54 per cent, down from 64 per cent in July. Consumers who feel confident about investing for the future continued to improve, increasing to 33 per cent in October, from 31 per cent last month. Consumer comfort levels for making major purchases, such as a car or new home, also edged up, with 22 per cent of consumers reporting they are more confident this month, compared to 19 per cent in September.

Fueled by a drop in consumer pessimism, the RBC Current Conditions Index also reached a twelve-month high in October as it climbed to 50.3, up 17.1 points from the September reading of 33.2. The percentage of consumers saying their personal financial situation is weak has dropped to 27 per cent in October from 37 per cent last month. Americans' assessment of current local economic conditions held steady this month, with 41 per cent of consumers saying their local economy is currently weak, essentially the same rate as the 42 per cent observed in September.

Consumers' near-term economic outlook brightened for the third consecutive month, sending the RBC Expectations Index to 54.2, up 12.7 points from September's level of 41.5. Although consumers' expectations for both their local economies and their personal finances are essentially unchanged since last month, there is now much less concern with impending job losses, resulting in the overall Expectations Index improving. Currently, 36 per cent of consumers believe the economy in their community will be stronger in the next month, while only 16 per cent believe it will continue to weaken, roughly the same split as in September.

Americans remain guarded about the job market, as evidenced by the slight increase in the RBC Jobs Index by 5.8 points in October to 59.3, well below the 78.8 level observed at this time one year ago. The most significant influence on confidence in job security continues to be real experiences in job loss. This month, 67 per cent of Americans say they or someone in their close circle has lost a job in the past six months, up from 63 per cent in September. Despite ongoing job losses, relative confidence in personal job security also continues to show signs of improvement. Nearly one-third (31 per cent) of American consumers say that they feel more confident in their job security now than they did six months ago, up from 28 per cent in September. Correspondingly, the proportion of consumers who are less confident in their personal job security is down to 58 per cent in October after reaching a high of 71 per cent in March.

The RBC Index is a monthly national survey of consumer attitudes on the current and future state of local economies, personal finance situations, savings and confidence to make large investments. The Index is composed of four sub-indices: RBC Current Conditions Index; RBC Expectations Index; RBC Investment Index; and, RBC Jobs Index. The Index is benchmarked to a baseline of 100 assigned at its introduction in January 2002. This month's findings are based on a representative nationwide sample of 1,000 U.S. adults polled from October 1-4, 2009, by survey-based research company Ipsos Public Affairs. The margin of error was +/-3.1 per cent.

BC Posts Large Increase in Non-Res Permits - October 6, 2009

The value of building permits across the country totalled $5.0 billion in August, up 7.2% from July. The bulk of the increase in construction intentions was due to gains in Ontario and British Columbia show figures released this morning by Statistics Canada.

The end of the municipal employees strike in Toronto in July contributed to the increase. If Toronto is excluded, the total value of building permits rose by 0.8%.

In August, municipalities issued $2.9 billion worth of building permits in the residential sector, an 11.2% increase, and $2.1 billion in the non-residential sector, a 2.2% advance.

Excluding the municipality of Toronto, the total value of building permits was up 6.3% in the residential sector and down 6.2% in the non-residential sector.

At the provincial level, the value of building permits increased in three provinces in August: Ontario, British Columbia and Alberta. The largest declines were in Saskatchewan, Quebec, New Brunswick, Manitoba and Nova Scotia.

Residential sector: Higher intentions for single-family and multi-family permits

Municipalities issued $2.1 billion worth of building permits for single-family dwellings in August, 15.1% more than in July. This was the sixth consecutive monthly increase, fuelled by higher construction intentions in Ontario, Alberta and British Columbia.

The value of building permits for multi-family dwellings rose 2.6% to $841.7 million in August.

British Columbia registered the largest decline in dollar terms, while Ontario, Alberta and Quebec posted gains in construction intentions for multi-family dwellings.

Municipalities approved the construction of 13,432 new dwellings in August, up 7.6%. The increase was largely attributable to single-family dwellings, which increased 12.1% to 7,315 units.

The number of multi-family dwellings approved rose 2.8% to 6,117 units.

Non-residential sector: Increases in the commercial and industrial components

The value of building permits in the non-residential sector increased 2.2% to $2.1 billion in August, as a result of gains in the commercial and industrial components. Increases in British Columbia and Ontario more than offset declines in the non-residential sector in seven provinces.

In the commercial component, the value of building permits rose 3.0% to $1.1 billion. In Ontario, the advance was due primarily to construction intentions for office buildings. In British Columbia, the construction of laboratories and recreational buildings accounted for most of the increase.

The value of building permits in the institutional component fell 1.1% to $737 million. While decreases were observed in seven provinces, the component's value tripled in British Columbia to $319 million, mainly as a result of higher construction intentions for medical buildings. It was the highest value for this component on record.

In the industrial component, the value of building permits rose 8.2% to $292 million. The increase was largely attributable to Ontario and Alberta. Construction intentions were down in Manitoba, Saskatchewan and Quebec.

Provinces: Increases in Ontario and British Columbia

Ontario and British Columbia posted the largest gains among the provinces. The August increase in Ontario came in the wake of a strike by Toronto's municipal employees a month earlier. If Toronto is excluded, the value of building permits in Ontario remained unchanged.

In British Columbia, the total value of building permits increased 47.5% to $912.7 million, mostly as a result of increases in the institutional and commercial components.

In August, seven provinces experienced declines in the value of building permits. Saskatchewan had the largest drop (-35.4%), as every component posted declines. Quebec followed with decreases in the non-residential sector.

Metropolitan areas: Gains in Toronto and Kelowna

The total value of permits was down in 20 of the 34 census metropolitan areas (CMAs).

The Toronto CMA had the largest increase (+83.7%), as only the institutional component was weaker.

Excluding the municipality of Toronto, the value of building permits in the remaining part of the CMA would have risen 16.1%, as a result of higher intentions for single-family dwellings.

The Kelowna CMA posted gains in both residential and non-residential sectors.

The total value of permits issued in the Hamilton CMA fell because of decreases in all components. Montréal experienced a decline due to lower demand for single-family and institutional permits.

Is October a Dangerous Constuction Month - October 6, 2009

August may be the cruellest month for brain injuries in Ontario's construction industry, but a new study shows October is not far behind.

"We thought it was important to track these injuries month by month," says Dr. Angela Colantonio, a senior scientist at Toronto Rehab and co-author of the study published this week in the journal Brain Injury.

Few academic studies have looked at brain injury among construction workers. Yet the construction industry - with approximately 400,000 workers in Ontario alone - is known to have a high rate of serious brain injury.

Traumatic brain injury is a leading cause of death and disability. TBI can profoundly affect a person's cognitive skills, memory, language and behaviour, as well as their independence, work life, and ability to participate fully in the community.

The new study used data from the Ontario Workplace Safety and Insurance Board on 218 cases of non-fatal brain injury which resulted in days off work in 2004-2005.

The authors weren't surprised to find the highest number of brain injuries in the busy construction month of August, while December had the lowest number. But they didn't expect to find a second peak of injuries in October. This may reflect a surge in work to complete projects prior to the winter months. Contributing factors, they speculate, could be shorter days to work, less light, and more adverse weather conditions. The authors want to do further study to find out if this seasonal pattern holds for other years.

Their study also begins to raise questions about the time of day when many construction-related brain injuries occur. It identifies two peaks during the day: the hour before and the hours after lunch.

"Most of us know that lethargic feeling that hits just before or after lunch at work: our energy dips, it's hard to focus but we have a job to finish," says Dr. Colantonio. Other factors may also be distracting workers in anticipation of, or during, their lunch break - and affecting their attention on the job. "For construction workers, this could have devastating consequences."

Among other findings, younger workers were much more likely to experience brain injuries in the morning, while older workers were more likely to suffer such injuries in late afternoon.

"More injuries in the morning for younger workers can potentially be explained by shifting sleep cycles in young adults favouring later times to go to sleep and get up, as well as overall shorter hours of sleep," the authors suggest. Fatigue may also be contributing to injuries experienced by older workers in the afternoon. Falls were much more likely to be the cause of injury among older workers.

"These results provide valuable information for preventing these injuries," says Dr. Colantonio. "They can be incorporated into prevention strategies."

Doug McVittie, assistant general manager and director of operations for the Construction Safety Association of Ontario (CSAO), says his group will circulate the findings to construction companies across the province, as well as labour and management health and safety committees. The results will also be shared with CSAO staff members who provide training and safety seminars for construction workers.

"Construction workers work in circumstances which are in some cases inherently risky; we're working at heights, we've got temporary and incomplete structures, moving equipment, moving materials," says McVittie, a study co-author. "Our association is interested in working to enhance the understanding of construction risks, and help with getting a better appreciation for the prevention message out there in all sectors."

Says Dr. Colantonio: "Our findings have drawn attention to areas that, with more study, could actually expose some of the underlying causes of work-related brain injury." Dr. Colantonio holds the Saunderson Family Chair in Acquired Brain Injury Research at Toronto Rehab. She is also a Professor in the Department of Occupational Science and Occupational Therapy at the University of Toronto.

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