Home builders feel pressure from economic downturn

Star Phoenix, April 8, 2016 - The ongoing economic slowdown continues to put pressure on Saskatoon home builders, who have reined in construction and could face significant challenges if the commodities market doesn’t rebound.

“It’s the sort of environment where the smaller builders will have to hang in there, so to speak, until the market turns,” said Goodson Mwale, the Canada Mortgage and Housing Corporation’s (CMHC) senior market analyst for Saskatchewan.

Saskatoon home builders began work on 93 new units in March, a 47 per cent decrease from the 177 units started in March 2015, according to data released Friday by the CMHC. On a year-to-date basis, housing starts in Saskatoon are down 37 per cent, to 366 starts in the first three months of 2016 from 579 in the same period last year.

Mwale attributed the slowdown to low commodity prices — oil is hovering around $40 per barrel, while potash is mired below $300 per tonne — curbing net migration and employment growth, two of the biggest drivers for housing demand. He said the result is builders slowing the pace of construction, especially for multi-family units, and trying to anticipate future demand. It’s too early to determine whether Saskatoon’s construction market has returned to “normal” growth, but the CMHC expects it to look much the same this year as it did in 2015, Mwale said. That means market consolidation and challenging conditions for builders, especially the smaller ones, through 2016, he added.

Chris Guérette, who took over as CEO of the Saskatoon and Region Home Builders Association earlier this year, said the downturn has already affected the city’s “tremendous” number of builders. Between 25 and 30 went out of business last year, bringing the city’s total to about 125 — well below the 2011 peak of 200, she said.

“It gets tough and now the builders that thought they could do something — or were really successful because the market allowed for that — now they’re realizing that, ‘Oh, this is not going to be so easy,’ ” Guérette said.

While the slowdown has affected smaller and non-professional builders — many of whom build only one or two houses each year — those specializing in niche, high-end markets are as busy as ever, as are many of the larger companies, Guérette said. So are construction workers, who have found opportunity in the city’s booming renovation market, she added.

“There is uncertainty for those who have not gone through this type of challenge in the market,” Guérette said. “A lot of our larger ones have gone through this before, and that’s what they say: ‘We’ll get through it. We’ve done this before. We’ve just got to hunker down for a bit.’ ”

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