Quebec’s home construction kick-off is set for the best year since 1987, but a slowdown is looming

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Residential construction in Quebec is on track for one of its strongest years in 2021, but rising property prices and commodity inflation likely mean the increase will be short-lived.

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Homebuilding across the province will hit 68,300 this year, a 26 percent jump from 2020, the Quebec Association of Construction and Housing Professionals (APCHQ) said Wednesday. If the trend continues, this would mark the best performance of the industry since 1987, when there were 74,179 homes started, and the third highest total on record.

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With new home prices rising 20 percent on average last year, residential construction is expected to slow down next year as affordability begins to weigh heavily on potential homeowners, and especially home buyers. first time. Home construction in Quebec will likely fall 18 percent to 56,000 in 2022, its first decline in seven years, APCHQ predicts. Fifteen of Quebec’s 17 administrative regions are expected to see declines in 2022.

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“You will probably see affordability affect demand next year, and supply will tighten,” Paul Cardinal, APCHQ’s chief economist, said in a telephone interview. “It is becoming more and more expensive for Quebecers in general to find accommodation. Land prices keep rising and we’ve seen big increases in the cost of raw materials. “

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It’s a similar story in Greater Montreal, where home construction is expected to hit 33,500 this year, its highest level in at least three decades, according to APCHQ data. Next year’s bill should be around 27,000 units, a 19 percent decrease, APCHQ said.

Construction of rental units in Quebec is also projected to decline in 2022 as material costs rise. Some 26,000 new rental units are expected to be built in the province next year, up from a record 34,800 in 2021, APCHQ said.

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The projected slowdown in construction means that Quebec’s housing deficit is likely to last for several more years. Between 40,000 and 60,000 housing units were missing by the end of 2020 to restore balance in the province’s residential real estate market. according to a recent APCHQ report .

Long-term labor shortages are also having an impact on residential construction. Quebec’s construction sector had a 5.6 percent job vacancy rate in the second quarter of 2021, data from Statistics Canada shows. That’s a 4.4 percent increase in the second quarter of 2019, before the start of the pandemic.

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“There was a labor shortage in the industry before the pandemic, and it has actually gotten worse,” Cardinal said. In addition, “several construction sites are experiencing supply problems. The delays are multiplying and it takes more time to obtain elements such as doors and windows. “

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Meanwhile, spending on home improvements is skyrocketing. About $ 18.5 billion will be spent on renovation projects in Quebec in 2021, an all-time high and a 25 percent increase from last year, says APCHQ.

The figure is likely to drop to $ 17 billion next year, a decrease of eight percent, as Quebecers start spending again on entertainment and travel at the expense of home improvements. A widely expected increase in mortgage rates It should also discourage some households from pursuing large renovation projects that require loans.

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