The radiating effects of weak commodity prices continue to depress Saskatoon's residential construction sector, which is trailing the pace set last year by almost 10 per cent, according to the Canada Mortgage and Housing Corporation (CMHC).
“It’s improved a bit over the last few months, but it’s still definitely lagging last year’s pace in terms of new construction,” said Goodson Mwale, the CMHC’s senior market analyst in Saskatchewan.
Home builders started work on 1,501 new single- and multi-family units in the first nine months of the year, down 9.3 per cent from the 1,655 houses and apartments started over the same period last year, the CMHC reported Tuesday.
Data indicates that builders are on track to start work on 2,079 new units this year, the CMHC said in its report. By comparison, 2,293 housing starts were reported in Saskatoon last year and 3,531 in 2014.
Mwale attributed the slowing pace of residential construction to weak economic conditions reducing demand and forcing builders to shift their focus from new construction to ensuring existing inventory is absorbed.
In August, Saskatoon had 806 complete and unabsorbed units, up 49.9 per cent from the 538 dwellings that were finished but unoccupied in the same month last year, according to CMHC data.
Saskatoon and Region Home Builders’ Association CEO Chris Guérette said the bulk of the decline can be attributed to a sharp decline in multi-family housing construction.
The CMHC reported Tuesday that multi-family unit construction in the first nine months of the year fell 22.4 per cent, to 684 new units from 882. By comparison, single-family construction rose 5.7 per cent, to 817 from 773 over the same period.
Mwale attributed the decline to the challenges of building a large apartment building or condominium complex in a weak economy, while Guérette said it’s a response to low demand caused by overbuilding in recent years.
The CMHC said the number of unabsorbed multi-family dwellings was 626 in August, up 114.4 per cent year-over-year. Guérette said that means single-family construction is “fairly healthy,” and could eclipse last year’s figure.
“We’re in a spot right now where the industry has to be watchful before making any future investments, but we’re still seeing … permits being pulled for housing. They’re still building.”
Mwale said while it’s unclear whether the city’s construction industry has felt all the effects of weak commodity prices, the CMHC is forecasting a modest rebound next year, driven by a projected recovery in commodity prices.