Positive Outlook For Canada’s Residential Construction Industry

Ottawa, April 19, 2021 — New research into the residential construction industry by The Conference Board of Canada has found that low mortgage rates and robust population growth are creating strong demand.

Combined with the increased appeal of properties in outlying metropolitan areas, the demand outlook for Canada’s residential construction industry is very positive.  Currently, the volume of residential housing units under construction is near a record high in many cities and homebuilders are busy replenishing low stocks of completed and unsold units, particularly single-family homes and apartments.

Residential construction was particularly strong at the end of 2020. Output recovered from an annualized 31 per cent decline in the second quarter of last year to post gains of 64 per cent in the third quarter and 17.7 per cent in the fourth and final quarter. 

“There’s no question that residential construction has recovered and maintains a positive long-term outlook,” says Robin Wiebe, a Senior Economist at The Conference Board of Canada. “We estimate that housing starts trailed household formations over the past 10 years, generating a shortfall of 140,000 units. With immigration poised to surge in the next few years, household requirements should remain strong.”

Despite the positive outlook, there are a few issues that Canada’s construction industry is grappling with, including rising prices for lumber and a shortage of skilled tradespeople to fill needed jobs.

The skills shortage is particularly worrisome for the industry. Between 2020 and 2029, 131,000 workers are expected to retire from the residential labour force, while only 105,800 new workers will be drawn from local populations. Going forward, the industry will have to look to non-traditional sources of construction labour, such as women, Indigenous people, and new Canadians, to fill an estimated shortfall of 45,200 positions.

The increasing use of digital technology and prefabricated dwelling components by builders could help them to improve productivity as demand increases, though new hires will be needed on a large scale over the coming decade.

“The good news for people employed in the residential construction industry is that we anticipate wages to rise by about three per cent annually between 2022 and 2025,” says Wiebe. “For builders, they will need to navigate labour shortages and uncertain land supplies if they are to make a profit in the medium term. Some developers seem to be snapping up available land in anticipation of future shortages.”

The full outlook for residential construction can be accessed on The Conference Board of Canada’s website.