In the face of a sharper than expected slowdown, the Association of Construction and Housing Professionals of Quebec (APCHQ) is being forced to downgrade its forecasts for both 2023 and 2024.
APCHQ now projects 40,000 housing starts in 2023, down 30% from 2022. That would be the lowest activity in seven years and the biggest drop in 28 years since 1995.
A “more than disappointing” start to the year, “still very high” construction costs and interest rate cuts still to come forced APCHQ to urgently review the forecasts published last December. , explains economist Paul Cardinal, director of the Commerce Department of the association.
As a reminder, five months ago, APCHQ was projecting closer to 46,000 housing starts for 2023, down 21% from 2022.
No rate cut
With inflation still a long way from the 2 percent target, APCHQ now estimates that the Bank of Canada will not cut interest rates until early 2024. All building categories are particularly sensitive to financing costs and will be hit by declines in housing starts, Cardinal says.
In 2023, for example, only 8,000 new foundations for single-family houses will be poured in the urban centers of the province (-23%), a new historic low.
With only 6,000 housing starts this year, condominiums will see the lowest construction volume in more than 20 years (-14 percent).
Finally, the rental housing segment is likely to suffer the most, while APCHQ expects housing starts to fall by 40% in 2023.
The real estate crisis will continue
“The aging of the population, reduced access to housing and, most importantly, the explosion in net immigration will fuel demand for rental housing like never before.” However, the recent increase in financing costs has significantly impacted the profitability of several rental projects that remain in the pipeline . Therefore, unfortunately, the housing crisis is not yet ready for a solution,” emphasizes Paul Cardinal.
Residential home renovation spending, which is also being negatively impacted by rising interest rates, high material costs and uncertainty surrounding the economic climate, will fall to approximately $21.5 billion in 2023. This corresponds to a decrease of 10% compared to 2022.
More details to come.