The Canadian real estate industry will get more good news today — not that it needs any more positive spin or Finance Minister Jim Flaherty even wants to hear it.
The Canadian government has no plans for now to clamp down on the housing market even though prices are rising again, Finance Minister Jim Flaherty said on Monday, but he pledged to investigate whether the price uptick looks to be more than temporary.
But a London-based group is now predicting construction output, led by housing, is set to grow by about 4% over the next year, despite the fact the industry faces labour shortages and financing concerns.
“It’s not stunning growth but it’s solid growth. Over the year, based on this survey, the construction industry will underpin the economy in Canada,” said Simon Rubinsohn, chief economist with the Royal Institute of Chartered Surveyors which interviewed dozens of senior managers in the largest construction firms in the country.
The news comes as Mr. Flaherty continues to keep a close watch on the Canadian housing industry which is showing signs of a recovery. The finance minister said he will be talking to developers about whether the housing sector needs more regulation as prices continue to rise in most markets and sales recover after a dismal 2012.
“I have no intention of interfering in the market for the time being,” Mr. Flaherty told reporters on Monday, acknowledging the Bank of Canada is very restricted on what it can do to cool the market since it doesn’t not want to raise interest rates for fear of impacting the overall economy.
The housing sector has shown renewed strength over the past two months, in part because statistics are being compared to a year ago when the market stalled. The Canadian Real Estate Association said this month that actual September sales were up 18.2% from a year ago while the average national sale price rose 8.8% during the same period.
Mr. Flaherty has already tightened mortgage rules four times, with one of the most restrictive measures being a lowering of amortization lengths from 40 years to 25 years. The shorter lengths increase monthly payments, allowing consumers to borrow less.
Economists who met with Mr. Flaherty encouraged him to meet with more people in the industry. “I do speak to people regularly in the business and I’m going to do more of it now because I want to ensure that this isn’t just a temporary bubble,” said the finance minister.
Based on the survey, the major concern out there for real estate is financing. “We try to get a sentiment and a quantitative view on what people think is going to happen and what is impeding growth,” said Mr. Rubinsohn, noting financial constraints were the top issue for respondents. “Output is increasing, particularly driven by private housing, infrastructure and some commercial development.”
Mr. Rubinsohn says the survey is “quite forward looking” because surveyors see many of the projects in the pipeline as they are involved in the early stages.
A shortage of labour continues to be an issue for the construction industry which ranked it as the second biggest issue after financial concerns, cited by more than half of respondents.
The group noted that British Columbia authorities are starting a recruitment drive in Ireland to attract construction workers to the province.
“Obviously they feel they need to look very far afield to attract construction workers,” said Mr. Rubinsohn, noting they’ve headed to a region like Ireland where the construction industry is still “flat on its back.”
Garry Marr | 29/10/13 | Last Updated: 30/10/13 7:22 AM ET