Soaring house prices could lead to a drop in new construction, APCHQ predicts

MONTREAL – Soaring housing prices could curb the number of residential construction projects next year, according to the Association of Professional Construction and Housing of Quebec (APCHQ).

The association indicates that it anticipates 56,000 new housing projects in Quebec next year, a drop of 18% from the 68,300 projects expected by the end of 2021.

If this were true, it would mark the first decline in the residential construction sector in seven years.

“The main problem is affordability, which has deteriorated at a rapid rate,” explains Paul Cardinal, director of the economic department at APCHQ.

In April, the price of existing properties jumped 32.6% year on year; that number is closer to 15 percent in July.

Rising interest rates could also affect the affordability of the real estate market, Cardinal said, as mortgage rates could rise by 50 basis points in 2022.

Renovations are also expected to decline next year.

In 2021, Quebecers spent $ 18.5 billion on their renovation projects, a 25% jump from 2020.

Cardinal says he expects renovation spending to hit $ 17 billion in 2022, down 8%.

He identifies three factors to explain this: the recovery in leisure and travel spending, rising interest rates and rising prices for building materials.

“People are going to go back to their usual consumption patterns and we think there will be less money for renovations,” Cardinal said.

Despite the downward trend, the situation will be far from critical for entrepreneurs, Cardinal notes.

“I’m not saying they’re going to take this as good news, but they’re very busy. They have very full order books,” he said. “Sometimes they have to say ‘Yes, but I’m going to go in three or six months.’ They also have difficulty retaining and recruiting workers. ”

Residential construction and the renovation sector had a record year in 2021.

The last time the numbers were this high was in 1987, when 74,179 new units were built.

Nevertheless, Cardinal estimates that there is a shortage between 40,000 and 60,000 units in Quebec.

“We have not been able to catch up in the short term, as contractors face difficulties in terms of the availability of materials and labor.

In September, the APCHQ pointed out that there was not enough housing built in recent years, adding an increase in supply is the best way to improve affordability.

He suggests that municipalities revise their bylaws to allow for the construction of more new homes.

The APCHQ also invites Quebec and Ottawa to reimburse “a substantial part” of the federal (GST) and provincial (QST) sales taxes on the purchase of a new house.

This measure could be modulated according to certain conditions, such as the price of the property or for a first-time buyer.

– This report by La Presse Canadienne was first published in French on November 24, 2021.

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Robert Valdivia

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