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Canada experienced an impressive five-year housing boom leading up to 2005. But while housing starts reached a 17-year high in 2004, they decreased 3.4 percent in 2005. Still, housing investment is expected to remain at extraordinarily high levels. Builders applied for $60.7 billion in permits in 2005, a 9.3 percent increase from one year earlier, and 48.9 percent of these new housing units are for multi-family units, including condominiums. A strong economy and mild weather helped single home starts increase by more than 14 percent in January 2006 to their highest level in six years. Key Trends The following economic trends will have a positive impact on the housing market in Canada: Expanding Canadian Economy – Wages and salaries are outpacing inflation and corporate profits are moving forward at a steady pace. Rebounding Consumer Confidence – Along with relatively low interest rates, this trend will help strengthen levels of consumer spending; Increased Immigration – This increasingly important part of the Canadian construction labor market is drawn by simplified immigration rules and entry requirements. Subdued Inflation – A strong Canadian dollar to the U.S. dollar will keep the size and speed of Canadian interest and mortgage rate increases in check. Critical Challenges Challenges facing the residential construction sector include: Labor shortages – Framers, drywallers, carpenters and plumbers are in especially short supply. In 2000, the lack of jobs in the construction industry forced many tradespeople to leave the field. That exodus, in addition to a booming construction market, leaves contractors struggling to find skilled labor. Shortages and rising costs of serviced lots – Ontario, Manitoba and Saskatchewan are experiencing especially short supply and high costs. Rising development charges – This is a critical problem for homebuilders in most regions. Increasing builder liability – The Ontario government is considering requiring most construction workers to be covered by workers" compensation in a bid to crack down on the underground economy.The Canadian Federation of Independent Business is against such a requirement because it puts undue pressure on small construction firms that are operating above board and paying more than their fair share of workplace safety insurance. Rising materials costs – For example, average selling prices for materials such as crushed stone, sand and gravel increased by 6 percent between 2004 and 2005.
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