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Home > Lowe's for Pros > Survey: Home Construction Industry on Solid Ground

Survey: Home Construction Industry on Solid Ground

By Chris Matt

Stability. That's the word that characterizes the current state of the home building and renovation industry, according to members of the Canadian Home Builders' Association (CHBA). The association's Winter 2012 Pulse Survey found that members expect 2012 to be similar to 2011 in terms of home construction and renovation activity.

"The main takeaway is not all that exciting, but it's reassuring — that it's business as usual," says Don Johnston, the association's senior director of technology and policy. "When we ask builders what they expect, they've consistently said, ‘Much of the same.'"

Stability is a welcome sight for an industry hit hard by the recession. Yet despite the overall sense of contentment, members do have concerns, particularly related to the price of serviced lots and the increasing burden of development charges.

Survey says

There were 194,000 home starts in 2011, and new home builders expect a marginal dip in 2012, forecasting about 186,000 new homes nationwide. Alberta is the only province expecting a higher number of starts this year, but builders only expect an increase of about 1 percent.

Expectations for home starts align with the activity builders see at new home sales sites. Aside from the move-down segment, buyer interest is tepid. For example, almost 30 percent of respondents report less first-time-home-buyer traffic this year, compared to 2011. Of course, without first-time buyers, there are no move-up buyers, Johnston says.

Despite the small decrease in the number of new homes and a lack of buyer interest, industry employment will not be affected, according to the survey. CHBA members—new home builders and renovators—say employment has been stable over the last 12 months, and almost a quarter of the respondents report that full-time employment is up compared to the same time last year.

"The industry is saying, ‘We're going to be close to what we built last year; we have a stable workforce,'" Johnston says.

Builders' biggest challenges

Although the industry's stability is a positive, new home builders did identify top issues affecting their businesses. Rising costs stemming from the price of serviced lots is the top concern. Almost one-third of the respondents identify the price of serviced lots as a critical issue nationwide, up 5 percent from 2011.

Other critical issues include:

  • development charges (30 percent)
  • more onerous municipal approvals/standards (23 percent)
  • shortages of serviced lots (21 percent)
  • more onerous environmental regulations (19 percent)

The impact of development charges, which are government levies, fees and taxes, varies across the country. For example, 44 percent of respondents in Ontario indicated development charges are a major issue, while the next highest percentage was 31 percent in British Columbia. The charges are designed to foster municipal and provincial growth, but the high costs continue to be a major issue for new home builders.

Renovation nation

While new home building has remained relatively flat, the renovation sector has continued to grow. About 37 percent of renovators say activity is higher now than 12 months ago, and about 40 percent expect even more activity in the next year.

"The renovation sector has been growing steadily for decades," Johnston says. "It's been nip and tuck with the size of the new construction sector. [But] in recent years, it has [passed] the new home side in terms of the size and impact on the economy."

Some of the growth can be attributed to federal and provincial rebates for energy-efficiency improvement to existing homes, Johnston says. But the increase in renovations also is helping debunk the myth that everyone in the older generation is looking to move into a new home later in life.

"Houses are getting older, and they're requiring more repair," Johnston says. "People are valuing the communities they're a part of. Some of the assumptions of older people moving into newer facilities have been overstated. Many seniors are going to be looking to stay in their own homes and modify their homes."

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