An increase in immigration will stabilize demand for new homes
Los Angeles, CA (PRWEB) February 15, 2013
The Home Builders industry has performed erratically over the five years to 2012; however, it is expected to eventually settle, resulting in revenue growing at an annualized rate of 1.1%. “Although the recession reduced the level of residential construction investments,” says IBISWorld industry analyst Deonta Smith, “several other factors led to fluctuating demand during this period.” For example, the largest consumption areas, Ontario and Quebec, contain the greatest demand levels for industry services; however, consumer investment in single-family homes dropped significantly during the recession. Following dramatic demand declines in 2008 and 2009, there has been considerable growth in land development and new home construction activities prompted by loosened mortgage insurance standards. As a result of the prevailing boom in housing starts, the Home Builders industry is expected to grow in 2012, prompting an estimated 7.8% rise in revenue to $104.3 billion.
Beginning in 2008, home prices fell and revenue volatility became a concern for many industry players; many participants sought to lower operation costs to stabilize fluctuations in profit and offset losses from suppressed inventory prices. According to Smith, “Cutbacks consisted of multiple firms releasing part of their workforce”; as a result, the total number of employees decreased at an average annual rate of 1.6% to 246,901 people in the five years to 2012. Simultaneously, many homebuilders attempted to take advantage of subcontractor labour to complete various aspects of construction activities. As such, the total wages in the industry is expected to increase at an average annual rate of 0.6% to 36.3 billion over the five-year period.
The Home Builders industry has a low level of market share concentration, with the top four players accounting for less than 5.0% of industry revenue in 2012. The largest major player, Mattamy Homes, generates about 1.0% of total revenue, while the second-largest industry operator, Brookfield Homes, accounts for about 0.4% of domestic industry revenue. During the five years to 2012, market share concentration has increased as a result of emergent expansion activities within the industry. Larger firms have been seeking opportunities in niche markets to achieve greater economies of scale and minimize risks caused by home price fluctuations and overall changes in the economy.
In terms of revenue growth, the industry's next five years will resemble its last five. A boost in immigration will benefit companies; increased population sizes will ultimately result in higher demand for homes. This trend is expected to stabilize growth in the housing market and eventually help reduce revenue volatility; as such, revenue is expected to continue its upward trend. Furthermore, market share concentration will likely increase in the next five years as small companies serving niche markets face competition from larger established contractors. In the years to 2017, the number of homebuilder companies is forecast to drop slightly as larger companies become more stable and achieve greater economies of scale.
For more information, visit IBISWorld’s Home Builders in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry primarily constructs single-family homes, where units are separated by ground-to-roof walls and have no units above or below. The industry also includes remodelling of houses and other residential buildings. Industry operators are general contractors, design-build firms and single-family construction management firms acting as general contractors and builders. The industry does not include speculative builders or contractors that build on their own account for sale.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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