Profits Drop to 8 Year Low

The Conference Board of Canada is reporting industry profits will hit an eight year low in 2013 due to declining housing starts and higher costs in their Canadian Industrial Outlook: Canada’s Residential Construction Industry – Winter 2013.

“A correction is occurring in the housing market,” said Maxim Armstrong, senior economist. “Strong building in recent years has exhausted demand. As well, the new mortgage rules implemented last summer are making it harder, especially for first-time buyers, to get access to credit.

“But there are still positive overall signs for the economy and the longer term prospects for the housing industry, including steady job gains, better consumer credit conditions and low interest
rates.”

After a cooling of residential construction in the fourth quarter of 2012, housing starts in Canada are expected to dip below 200,000 in the next two years. While Calgary is seeing a thriving condo market, the report notes the condo market is struggling in cities such as Toronto and Vancouver, though the multi-unit segment will continue to be the main driver of construction growth in the country.

Pre-tax industry profits came in at $3.9 billion in 2012, and are expected to dip to $3.3 billion in 2013. The industry is expected to return to prerecession profitability levels by the end of the forecast period in 2017.

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