The latest data on housing-construction activity in Canada illustrates the depths to which investment in home building has slowed in the country in recent months – including alarming plunges in some provinces that don’t come up all that often in Canada’s housing-bubble debate.
Statistics Canada’s monthly numbers on investment in new housing construction, published Monday, show that in real terms (i.e. adjusted for inflation), spending nationwide in February was down 25.5 per cent from its peak of just five months earlier. This set of data takes the housing story a step further down the process than the more closely watched housing-starts numbers, as it indicates actual construction spending rather than building intentions – and speaks directly to the sector’s actual contributions to gross domestic product.
While housing-construction investment peaked at different times last year for different provinces (for example, as early as July in Quebec, as late as October for B.C., Ontario and Nova Scotia), every province shows a substantial decline from these recent peaks. Most drastic is in New Brunswick, where spending plunged 52 per cent. Investment in both Manitoba and Quebec was off 41 per cent.
On the other side of the ledger, Alberta experienced a relatively modest 16-per-cent decline in new-housing investment. Indeed, Alberta’s housing-construction activity still looks quite healthy on a year-over-year basis, with spending up 14 per cent from February, 2012.
In fact, for a bit of perspective, six of the 10 provinces posted new-home construction investment was actually up from a year earlier; Canada’s overall spending was up 2.8 per cent on the inflation-adjusted basis. It was also one of the strongest February numbers in history. The data suggest that while spending has cooled markedly from the frenzy of last summer and early fall, on a longer-term basis new-housing investment remains relatively healthy.
Still, while home construction was a decidedly positive contributor to GDP growth through much of last year, its rapid decline since last summer means it continues to subtract from GDP growth this year – though the pace of the decline has slowed considerably, suggesting the size of the GDP drag may be getting smaller. Spending in real terms was down 0.6 per cent in February from January, and was off 7.9 per cent since the start of the first quarter; while that’s hardly good news, it’s still much smaller than the 19-per-cent drop that occurred in the fourth quarter.