New home construction plunging in Saskatoon
Construction companies fear drop may put some of them out of business
Ron Olson has spent more than four decades building homes in and around Saskatoon, long enough to have seen a few booms and busts in the city’s construction industry.
His company, Saskatoon-based Boychuk Construction Corp., is among the city’s oldest builders and land developers, and has put up an estimated 7,000 homes in the area.
But the most recent downturn, which has forced builders to cut staff amid flagging demand for new homes, is unique, Olson said Tuesday in an interview.
“It’s so sudden and so fast. I mean, we dropped within less than 18 months or so from a fairly normal market down to starts that are representing 12-year lows in the city.”
Olson said his company, which employs around 15 people, has not had to lay anyone off, but work for subcontractors and tradespeople has essentially dried up over the last year.
“We have long-term builders who can weather these kinds of downturns, but there’s certainly many builders who, if it continues, are going to have a very hard time staying in business.”
Earlier this month, the City of Saskatoon reported a dramatic decline in the number of new building permits issued in 2018, — 1,180 compared to the peak 3,000 issued in 2012.
Apartment buildings and townhouses experienced the sharpest year-over-year decline, falling 49 per cent, while single-family houses slid 25 per cent and duplexes 19 per cent.
The Saskatoon and Region Home Builders’ Association (SRHBA) paints a similarly bleak picture, noting that new home sales dropped last year between 11 and 30 per cent, depending on type.
Olson and SRHBA CEO Chris Guerette attributed the slump to weak commodity prices, as well as the application of provincial sales taxes on construction contracts and Ottawa’s new mortgage stress test.
The provincial government, which has signalled that it has no intention of reinstating the PST exemptions, estimates the tax has increased the cost of construction projects by just under three per cent.
On top of that, Guerette said, the new mortgage stress test is keeping thousands of potential buyers out of the market.
The stress test requires anyone seeking a mortgage to prove that he or she can make payments at an interest rate two percentage points above their qualifying rate.
Guerette, who is in Ottawa to lobby against it this week, said a test designed to cool overheated markets in Toronto and Vancouver should not be applied evenly across the country.
“We overshot this by a lot,” she said, adding that simply reducing the threshold to one point from two would afford thousands more people the opportunity to get into the housing market.
In addition to employing thousands of people directly and indirectly, Saskatoon’s housing industry is regarded by some as a reflection of the city’s overall economic health.
Olson said while he expects 2019 to bring improvements, as many of the big banks have forecast, the last 12 months have been difficult for many in the industry.
The province shed 2,000 construction jobs last year.
“It’s not a happy situation when you’re not able to keep your people working … And it’s hard on everybody. It’s hard on families. It’s hard on kids, even. It affects everyone.”
We dropped within less than 18 months or so from a fairly normal market down to starts that are representing 12-year lows.