Look for more luxurious features and improved energy efficiency in new homes built in Canada during the coming year. A survey of members of the Canadian Home Builders' Association (CHBA) shows four in 10 builders say they will make significant changes to the houses they are building, including more luxurious features, better energy efficiency, more square footage and more environmentally favourable features.

Builders say they are shifting their main target markets from first-time buyers to the move-up market, which is better able to afford larger homes and extra features. The average new single-detached house built last year in Canada was 1,800-square-feet, on a lot 50-feet-wide and 110-feet-deep, builders say. The largest houses are being built in British Columbia; the largest lot sizes are in Atlantic Canada.

The surveyed builders say total housing starts in Canada will fall to 181,000 in 2003, a decrease from the 205,034 started in 2002. The forecast is more pessimistic than that of Canada Mortgage and Housing Corp. (CMHC), which again predicts starts will top 200,000, and several other economic analysts.

Renovation continues to be hot. One in four renovators who are members of the CHBA say that they saw an increase in renovation activity during the last 12 months, and a similar proportion expects higher activity this year. The median size of renovation projects is reported to be $30,000 and it takes an average of six weeks to complete a project. Hot renovations are room additions and kitchen and bathroom renovations, which increased last year, while renovators reported fewer conversions from non-residential to residential uses.

Labour issues are the number one concern of Canadian home builders. Shortages and the rising cost of framers, carpenters, drywallers and bricklayers were cited most often as the most challenging problem facing builders. Some builders are also concerned about the cost and availability of serviced building lots. Increasing builder liability and rising development costs were also mentioned.

Builders across the country expect that their building costs will go up during the coming year, and that new single-detached house prices will also rise.

The CHBA also surveyed 40 building product manufacturers. Almost 90 per cent of them reported higher domestic sales in 2002 than in 2001, better than the manufacturers predicted in last year's survey. Overall, the median sales increase was 13 per cent.

This year, 54 per cent of the manufacturers are expecting a further increase in sales. Manufacturers, like builders, are also taking a conservative view of housing starts, expecting them to range from 175,000 to 190,000. However, renovations account for more than half of total residential construction spending, which should more than compensate for a slowdown in starts.

Most of the Canadian manufacturers surveyed export some of their products, mostly to the United States.

With the housing market booming in both countries for the last few years, manufacturers say the biggest challenge they face is their competition. They say it's an on-going struggle to gain or retain market share and profit margins in the face of stiff competition. Other concerns are issues of productivity, improving business practices and taxation. A lack of skilled labour is a problem for 22 per cent of the companies surveyed.

About one-quarter of the manufacturers say there were some shortages of their building products last year, and several expect more shortages in 2003.

Meanwhile, the latest figures from CMHC show urban housing starts for the first two months of 2003 were 11.5 per cent higher than for the same period of 2002 (23,045 units compared with 20,672 units). The single-detached market increased 6.5 per cent while multiples increased 16.2 per cent.

But CMHC is sticking with its forecast for total housing starts to hit 205,500. "In February, the housing market continued to show a high level of activity," says David Weingarden, senior economist at CMHC. "The surge in multiples reflects the volatility typical of that sector of the market."

Published: March 13, 2003

Use of this article without permission is a violation of federal copyright laws.

Jim Adair is editor of REM: Canada's Real Estate Magazine, a business publication for real estate agents and brokers. He is also consulting editor of Homes & Cottages, Canada's largest building and renovation magazine. Email jimhc@pathcom.com.