Construction – Canada – September 2016BY: PAUL YOUNG, CPA, CGA

Agenda

Housing Starts Building Permits – Summary Building Permits – Municipalities/City Government Policies / Federal Government Government Policies / Drywall Government Policies / Hydro Rates Retail Sales / Household Spending Job market / Construction Infrastructure Other Sources

Housing Starts

Source: Stats Canada, BMO, Scotiabank

Building Permits/Canada

Source: Stats Canada

• Municipalities issued $7.3 billion worth of building permits in August, up 10.4% from July. This marked the second consecutive monthly increase.

• The gain in August was mainly attributable to higher construction intentions in Quebec, Ontario and British Columbia

Building Permits/Canada

Source: Stats Canada

Federal Government / Mortgage Rules

Canada’s new mortgage rules risk pushing borrowers deep into the shadow lending market, with brokers set to line up secondary loans with private lenders as a means of circumventing tests on borrowers’ ability to repay debt.

Canadian officials have become increasingly alarmed by systemic risk from record household debt levels and a frothy housing market. In the latest bid to cool the red hot Vancouver and Toronto markets, Ottawa’s new rules require lenders to stress test borrowers’ ability to pay back loans at levels higher than current rates.

As a way around them, brokers are planning to direct more borrowers to the so-called shadow lending market where private investors, frustrated by low interest rates on savings accounts, are eager to lend at rates that can enter the double digits.

Source: http://business.financialpost.com/personal-finance/mortgages-real-estate/canadas-mortgage-brokers-find-ways-around-new-lending-rules

Drywall

Last month, in a preliminary ruling, the Canada Border Services Agency announced it would impose a provisional tariff on most drywall, also known as gypsum board, coming from the United States. The CBSA said it found evidence the drywall was being "dumped," meaning the products are being sold into Canada at below normal prices.

The duties imposed ranged between 105 per cent up to 276 per cent, sending shock waves through the construction industry, particularly for dry wallers who often sign fixed contracts with builders and will now have to absorb the increased costs.

Source: http://www.cbc.ca/news/politics/drywall-tariffs-alberta-construction-1.3808633

Hydro Rates/Ontario Electricity customers will continue paying the same rates they’ve had since last May until May 2017. The off-peak rate of 8.7 cents a kilowatt hour is less than half the on-peak rate of 18 cents per kwh,

and off-peak hours expand to 7 p.m. to 7 a.m. weekdays and all day weekends and holidays starting next month.

Mid-peak hours, which cost 13.2 cents a kwh, will run from 11 a.m. until 5 p.m. weekdays, while on-peak hours will be 7 a.m. to 11 a.m. and 5 p.m. to 7 p.m. weekdays.

Meanwhile, MPPs on Wednesday passed legislation — announced in the throne speech in September — that will rebate the provincial portion of the HST, aka 8%, from electricity bills as of Jam. 1, 2017.

The government says the move will mean an average savings of about $130 annually or $11 each month, for about five million residential consumers, farms and small businesses.

Rural electricity ratepayers will see their bills drop by an average of $540 a year or $45 each month.  Carbon Tax will be buried in the price per kilowatt hour.

Source: http://www.torontosun.com/2016/10/19/hydro-rates-not-rising-for-first-time-since-2008

Retail Sales A drop in Canadian retail sales in August and cooler-than-anticipated annual inflation in September reinforced

speculation the Bank of Canada may lower interest rates again, after the bank acknowledged this week it had considered cutting.

Statistics Canada said on Friday retail sales fell 0.1 percent, missing expectations for a 0.3 percent gain. Volumes fell 0.3 percent.

The weak retail performance in the first two months of the third quarter could mean there is somewhat less buoyancy to the expected economic rebound. Analysts expect growth picked up in the third quarter after wildfires in Alberta caused a contraction in the second quarter.

Economists had anticipated retail sales would be supported by the new child benefit checks that families began receiving in July, but the figures suggested consumers may be choosing to save or pay off debt for now.

"This is exactly when the much-ballyhooed child benefit effect should be kicking in in a big way," said Doug Porter, chief economist at BMO Capital Markets. "If it is not showing up here, it's not going show up anywhere."

The annual inflation rate rose to 1.3 percent in September, shy of forecasts for an increase to 1.5 percent, as food prices saw their smallest gain since 2000.

Source: http://ca.reuters.com/article/businessNews/idCAKCN12L1IR

Job Market/Construction (in demand)

Construction Workers Electricians Heavy Machinery Operators

Source: http://www.canadianliving.com/life-and-relationships/money-and-career/article/the-5-best-skilled-trades-jobs-in-canada

InfrastructureProposal for infrastructure funding: The council predicts an infrastructure bank could raise private capital at a four-to-one ratio to

deliver more than $200-billion in infrastructure over the coming decade with a focus on projects worth at least $100-million.

Ottawa’s previous efforts to attract private infrastructure investment – including through an agency focused on public-private partnerships – have had limited success. Pension fund managers say Canadian projects to date have simply not been big enough.

Issues in play Open and transparent procurement process Oversight to ensure projects are on time and within budget Risk management assessment including profitability assessment Focus on export driven sectors Focus on moving goods to market

Source: https://www.pressreader.com/ or http://www.theglobeandmail.com/news/politics/morneaus-economic-growth-council-calls-for-national-infrastructure-bank/article32461740/

Other sources:

Softwood Lumber - http://www.slideshare.net/paulyoungcga/softwood-lumber-dispute-canada-and-united-states

Real Estate – http://www.slideshare.net/paulyoungcga/real-estate-trends-and-analysis-for-canada-august-2016

Labor Market - http://www.slideshare.net/paulyoungcga/canada-labour-market-september-2016

Carbon Taxation - http://www.slideshare.net/paulyoungcga/what-is-carbon-tax-or-a-price-for-carbon