2023-2024 Outlook: Assessing the Pulse of Canada’s Construction Industry Amid Economic Shifts

In 2023, the Canadian construction industry experienced a contraction due to several economic factors, including the skilled labour shortage which drove competitive wages and contributed to pushing overall construction costs up. Both residential and non-residential construction saw a decrease in new project starts, contrasting with the exceptional growth in construction seen in 2022.

A high-level overview of all investment sectors and constituent subsectors
Seasonally adjusted data for all subsectors, showing a generally upward trend.

To evaluate the health of the construction industry proceeding into 2024 and beyond, we looked at Statistics Canada’s database on investment in building construction. We also considered key industry forecasts from BuildForce and CMHC. The data suggests that, while the overall trend  is upward, construction is currently slowing down. However, the CMHC, along with market sources, predict a gradual recovery for the industry beginning this year.

 

New Construction and Renovation

Economic recovery from the Covid-19 pandemic drove a surge in both renovations and new housing starts in 2022. This boom was so acute that investment in new construction actually peaked above investment in renovations for the first time since data was began recording in 2017. Subsequently, the market cooled down in 2023 and saw a national 7% drop in new housing construction. Rising labour and materials costs as well as inflation were all factors. However, CMHC’s 2023 Housing Market Outlook forecasts that residential construction will begin to slowly bounce back towards the latter part of this year. Statistics Canada reports that residential and non-residential building costs have been decelerating since 2023.

Thinking a little more long-term, a 2023 report from BuildForce looks at Canadian construction and labour markets for the forecast period of 2023-2032. It predicts that by 2030, there will be more people employed in renovation and maintenance sectors than in new housing construction. This will be driven partly by aging populations converting and retrofitting existing dwellings to age in place. Meanwhile, engineering-construction projects for public infrastructures, such as transit systems, will drive employment in non-residential new construction.

All of non-residential taken together is at a healthy market and at nearly the same market penetration when compared to residential.

Commercial construction, while generally stable compared to other construction sectors, has also seen a notable amount of growth in the past few years. Although it receives significantly less total investment relative to other sectors, month-by-month investment data from Statistics Canada shows that commercial renovations have creeped up by an impressive 53% in the last six years, while new construction grew by 49% over the same period. As can be seen in [the graph below], commercial investment is significantly more stable over time than residential investment, but a close look at its history over the past six years shows $1 billion of growth.

 

Renovations and New Constrution happen at a higher volume in all residential compared to non-residential, but has still seen considerable growth.

 

 

Single-Family Homes and Multi-Family Units

While housing starts were down 7% in general last year, it was single-family homes that saw the brunt of this decrease. Statistics Canada reports than in certain major urban centres, like Vancouver and Toronto, new housing starts were actually higher in 2023 compared to 2022, as a result of local increases in multi-unit projects. Census data suggests that the gap between single-family and multi-unit housing will continue to widen, with both types of housing increasing, but the latter gaining much more traction, while the former decelerates.

The continued boom in new multi-unit projects is a reflection of the glaring gap between renters and homeowners in Canada. As of late 2022, Statistics Canada reports that owner-occupied housing has been in steady decline for over a decade, and the 2021 Housing Survey found that renters were more than twice as likely as homeowners to be living in unaffordable housing. Even so, BuildForce’s 2023 report on construction and maintenance notes that national demand for both multi-unit and single-detached housing is strong, predicting that the growth of new starts will continue climbing through 2029. So, while housing affordability is undoubtedly in crisis, the health of the construction industry itself is expected to remain stable and relatively prosperous for the foreseeable future—even in the case of single-family residential construction.

As we look ahead into 2024 and beyond, the Canadian construction industry stands in a sort of limbo: growing, but slowly, and not nearly enough to keep up with demand.. Economic factors, notably the skilled labor shortage and escalating construction costs, have cast a shadow over both residential and non-residential construction sectors. Despite this, projections from organizations like BuildForce, CMHC and Statistics Canada offer a glimmer of hope, predicting a gradual recovery in the coming years. The shift towards renovation and maintenance sectors hints at evolving trends in housing preferences and demographics.

 

Sources list:

Building construction price indexes, 4th q 2023: https://www150.statcan.gc.ca/n1/daily-quotidien/240201/dq240201a-eng.htm

CMHC housing starts down: https://www.cmhc-schl.gc.ca/media-newsroom/news-releases/2024/housing-starts-down-2023-from-2022

CMHC Housing Market Outlook highlights: https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/market-reports/housing-market/housing-market-outlook

BuildForce, Construction and Maintenance Looking Forward: An Assessment of Construction Labour Markets from 2023 to 2032: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.constructionforecasts.ca/sites/default/files/highlights/2023/2023_National_Constr_Maint_Looking_Forward_-_May_4.pdf

StatsCan 2022: To Buy or To Rent: https://www150.statcan.gc.ca/n1/daily-quotidien/220921/dq220921b-eng.htm

Tyler Holt is the Editor of Wood Industry / Le monde du bois magazine. He has a master’s degree in literature and publication, and years of experience in the publishing and digital media industry. His main area of study is the effect of digital technologies on industrial and networked production.

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