Profitability of Canadian real estate as a whole is predicted to improve over the next few years, however
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In its latest outlook, The Conference Board of Canada stated that residential starts and non-residential construction in Canada will see notable deviations from each other in 2017, with the former slowing down and the latter exhibiting stronger activity.
“Not only is the residential construction industry seeing a downturn in housing starts, spending on home renovations is now showing signs of weakness too. In all, we expect price-adjusted spending growth in the residential construction industry to average less than one per cent per year through 2020,” the Board’s director of industrial trends Michael Burt said.
“A slowdown in multi-unit construction, particularly in the apartment and row house segment, is expected to drag down industry output by 0.2 per cent in 2017. Signs of this downturn have already shown up in recent housing starts data, with multi-unit housing starts down 2.3 per cent in 2016. Multi-unit housing starts will take another step back in 2017, and will struggle through 2021,” the Board said in its announcement.
However, “despite weaker residential construction activity, pre-tax profits are forecast to grow by 4.7 per cent this year to reach $4.2 billion.”
Meanwhile, “non-residential construction output is forecast to expand by 3.7 per cent this year, led by growth in the institutional segment,” as well as “increased investment in warehouses and hotels.”
“Providing support to the industry's commercial segment is the rise of online shopping, which is beginning to see a faster rate of adoption in Canada. This will help support a U.S.-style buildup in warehouses across the country, although Southwestern Ontario will be a key beneficiary,” the Board added.
“Industry profitability is expected to improve slightly over the next five years. Pre-tax profits are expected to reach $2.2 billion this year and grow by an average of more than 4 per cent between 2018 and 2021.”
“Not only is the residential construction industry seeing a downturn in housing starts, spending on home renovations is now showing signs of weakness too. In all, we expect price-adjusted spending growth in the residential construction industry to average less than one per cent per year through 2020,” the Board’s director of industrial trends Michael Burt said.
“A slowdown in multi-unit construction, particularly in the apartment and row house segment, is expected to drag down industry output by 0.2 per cent in 2017. Signs of this downturn have already shown up in recent housing starts data, with multi-unit housing starts down 2.3 per cent in 2016. Multi-unit housing starts will take another step back in 2017, and will struggle through 2021,” the Board said in its announcement.
However, “despite weaker residential construction activity, pre-tax profits are forecast to grow by 4.7 per cent this year to reach $4.2 billion.”
Meanwhile, “non-residential construction output is forecast to expand by 3.7 per cent this year, led by growth in the institutional segment,” as well as “increased investment in warehouses and hotels.”
“Providing support to the industry's commercial segment is the rise of online shopping, which is beginning to see a faster rate of adoption in Canada. This will help support a U.S.-style buildup in warehouses across the country, although Southwestern Ontario will be a key beneficiary,” the Board added.
“Industry profitability is expected to improve slightly over the next five years. Pre-tax profits are expected to reach $2.2 billion this year and grow by an average of more than 4 per cent between 2018 and 2021.”
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