Construction Industry Forecasts

The multi-country stimulus with respect to infrastructure is having an impact on economies in general and is spilling over into residential construction. China is increasing its money supply at a rapid pace to fund its spending programs. Lending in China is up by double in the first half of this year versus the same period last year. Auto demand has accelerated accordingly. This is one of the reasons behind the increase in world oil prices. Another offshoot has been China building big tank farms to store oil. Chinese citizens are also jumping into the housing market. A surge in housing construction is underway.

China’s housing recovery is corresponding with the timing of an upturn in the U.S. housing market. U.S. new home sales have finally started to move off the shelf again and starts will surely follow. The increased activity is being driven by bargain prices, low mortgage rates and an $8,000 first-time homebuyer’s tax credit. Canada’s housing market is the beneficiary of the same kinds of privately- and publicly-sourced factors.

In Canada, the decline in housing starts has been only recent. It began in the fall of last year versus a January-2006 turning point in the States. The recovery in starts in Canada may be long and slow. But the resale home market is doing well and this is encouraging with regard to new housing. Between 2002 and 2008, average annual starts in Canada were 200,000 units plus. In the 1990s, they were 150,000 units. It will probably take until 2011 before annualized monthly starts in Canada rise above 200,000 units consistently.

Alex Carrick