Only a handful of medium-sized cities across Canada will see a significant increase in housing construction in the years to come, according to a report published by the Conference Board of Canada.
The study focused on 15 cities and economic factors such as the GDP, manufacturing and both residential and non-residential construction.
Each of the 15 cities are expected to see positive economic growth in 2015 with Kitchener-Cambridge-Waterloo, Abbotsford-Mission and Moncton leading the pack.
However, oil looms large in the construction forecasts and the Conference Board of Canada called weak prices a “major challenge” for the housing market. Housing starts are expected to fall from 189,300 units in 2014 to 170,000 units in 2015. Meanwhile, total residential investment is expected to rise by 1.7 per cent in 2015, before falling slightly in 2016.
The outlook for new homes is relatively sunny in Oshawa, Ontario because of steady population growth “as relatively affordable housing attracts residents from surrounding areas.” The city is expected to see 1,798 housing starts his year, up 7.6 per cent from 2014, with the multi-unit market propelling the market.
In BC, Abbotsford–Mission is expected to see robust growth with housing starts surging 13.3 per cent in 2015, year-over-year. “Healthy population gains are expected to keep housing starts moving upward over the next few years, with growth forecast to average 12.2 per cent per year between 2016 and 2019,” said the Conference Board of Canada in the report.
Why the increase? The metro area has experienced recent employment gains thanks to improvements in sectors such as manufacturing, primary and utilities and construction. Aside from residential construction, BC Hydro is currently updating its facilities at the Ruskin Dam in Mission and a massive new industrial park is being built in Mission as well. In Abbotsford, construction has started on a new 50-bed mental health facility.
The city’s real GDP growth is forecast to grow at a rate of 3.2 per cent this year, second only to Kitchener-Waterloo-Cambridge among the list of 15 mid-sized metros.
Interestingly, though Kitchener-Waterloo-Cambridge has been singled out for its economic promise, the Conference Board isn’t anticipating a boom in housing construction. That’s because the technology triangle has already experienced a surge in building activity with 2014 seeing a record-high 3,581 multi-family unit starts. Since developers currently have their hands full with these recent projects “the outburst in multiples will not be repeated. We thus expect starts to pull back by just over a third in 2015.”
Forecasts for the other city remain mixed. In Sherbrooke, Quebec, the multi-unit sector saw housing starts fall 28 per cent in 2014, but they are expected to rebound this year, rising up 16 per cent. These gains are expected to offset plateauing starts in the single-detached sectors.
Elsewhere in Quebec, Trois-Rivières should see housing starts fall this year as the city’s “new housing market looks slightly overbuilt.” Flat population growth is expected to dampen housing starts in Saguenay.
In Ontario, manufacturing hubs such as Windsor and London could see modest growth. The board believes Windsor’s residential construction market will be “healthy.” Though there will be a drop in starts in 2015, they’re expected to inch up again in 2016. London has seen housing starts decline in the last two years as “manufacturing continues to heal.” The Conference Board of Canada is anticipating a modest uptick this year, fueled in large part by the multi-family sector.
This year, housing starts in Kingston are expected to fall to their lowest level since 1998. However, they are forecast to inch up again in 2016. The situation in St. Catharines–Niagara is expected to be less positive with an anticipated 9.2 per cent decline in starts this year after the surge in building activity in 2014. Starts are expected to fall in 2016 as well.
In the Western part of the province, both Greater Sudbury and Thunder Bay experienced a pullback in housing construction last year. In Greater Sudbury, “falling backlogs of unsold units suggest rising starts both this year and next” while Thunder Bay is expected to see a modest amount of new starts this year.
On the East Coast, St. John’s was named as the city expected to see the weakest overall economic growth with the real GDP rate inching up by 0.5 per cent in 2015 in large part due to falling oil prices. In 2014, housing starts hit their lowest level since 2001, but there’s some promise ahead for 2015. Increased activity for multi-family units should spur the total amount of housing starts up 9.9 per cent. Still, the sluggish economy means starts will decline once again come 2016.
Meanwhile, both Moncton and Saint John are expected to see housing starts decline this year, then pick up again in 2016 as the economy improves.
It’s a stark contrast to big cities such as Toronto where new home construction has been seemingly unstoppable. The economic recovery following 2008 recession has been slow for many of the medium metros, according to the report writers.
“Although activity is improving, as both a weaker Canadian dollar and a solid U.S. economy foster a gradual recovery in manufacturing, economic growth will remain modest and downside risks persist,” said Alan Arcand, Associate Director, Centre for Municipal Studies, The Conference Board of Canada.