Building boom goes silent

Lynn Harrison has lost her job twice now in the boom-bust home building industry. This time, she's getting out for good.

The former marketing manager at British Columbia's Vesta Properties Ltd. was laid off as the slump in the residential construction sector took hold late last year. She lost a job the first time during the 2000-2001 downturn, and now she's looking for a senior marketing position in a completely different industry.

"The cycle will come back but I don't want to wait until it gets better," said Ms. Harrison, who was laid off in December at Vesta, which is based in the Vancouver suburb of Langley. "No one wants to build a bunch of homes no one wants to buy. There are just times when you have to cut people."

Ms. Harrison was part one of the greatest job creation booms that drove employment in the sector to 1.2 million from about 800,000 at the beginning of the decade.

And now she's among those leaving as construction plummets. Canada Mortgage and Housing Corp. forecast yesterday that housing starts will decrease 24 per cent this year from 2008 - levels not seen since 2001, before the last boom began.

Vesta Properties, which builds homes in the lower mainland, along with a project north of Calgary that it has had to scale back, is just one example. Job cuts have come primarily at work sites, where, for example, subcontracted construction companies will now run a framing crew with four workers instead of six or seven, vice-president Dennis Wiemken said.

The industry slumped markedly at the end of last year, Mr. Wiemken said, and now, with prices lower, sales have steadied but at a lower pace.

"The big dollars aren't there like they used to be," he said, citing the slowdown but adding the industry is still viable.

Job losses in the industry are expected to climb as home sales fall across much of the country and building activity slows rapidly.

The startling speed with which the housing market slowdown hit late last year means the full brunt of its impact is just starting to spread through the real economy, said Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.

"What this does suggest is that there will be a lot of downside for construction employment."

In the third quarter of last year construction, both residential and commercial, accounted for 7.3 per cent of the overall employment in the country.

Highly vulnerable to the downturn are provinces that rely heavily on construction, including British Columbia, Alberta and Ontario.

In British Columbia, for example, one in every 10 jobs is in the construction industry. Thousands of home-building jobs in the once-red-hot Lower Mainland of British Columbia are expected to be lost as the downturn spreads.

For every housing start, 2.8 full-time direct and indirect jobs are generated, according to Peter Simpson, CEO of the Greater Vancouver Home Builders Association.

"Smart builders are finding opportunities but it's challenging times for the industry," Mr. Simpson said.

"The ripple effect is far-reaching. There's the jobs on-site, the guys swinging hammers, cutting the wood, all the way to people in manufacturing plants producing the materials. Even the guy driving the coffee wagon to the site. Everyone's affected."

In the country's largest housing market, Toronto, sales of both new and resale homes have plummeted recently. Last month, existing home sales were at just half their level from the year before.

During the slowdown, inexperienced developers that started their first projects to try to cash in on the boom are most likely to run into financial trouble, said Riz Dhanji, vice-president of sales and marketing at developer Canderel Stoneridge.

They may not be able to get financing, and could have to shelve projects that are still in the planning stages, he said.

Canderel has been in business since the 1970s and developing condos for 10 years. It plans to break ground this summer on a 75-storey mixed-use retail and residential tower in downtown Toronto.

Despite the housing market decline, sales remain steady at the project, which is called Aura. Some 90 per cent of the units have sold, Mr. Dhanji said.

A sales strategy that includes requiring substantial deposits and putting limits on flipping of presale units has helped protect it during the downturn, he said.

"Less than 5 per cent of our buyers have put down less than 20 per cent. With a deposit like that, you are much less likely to try to walk away," he said.

(prepared by Kathryn Tam/Globe & Mail)


HOUSING STARTS, IN UNITS

2007 228,343
2008 211,056
2009 160,250
2010 163,350

RESIDENTIAL RESALES, IN UNITS

2007 523,701
2008 433,990
2009 370,500
2010 405,000

AVG. RESIDENTIAL RESALE PRICE, IN DOLLARS

2007 $305,707
2008 $303,607
2009 $287,900
2010 $288,100

KATHRYN TAM/THE GLOBE AND MAIL
SOURCE: CANADA MORTGAGE AND HOUSING CORP

(prepared by DAVID EBNER AND LORI McLEOD/Globe & Mail)