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The Building market and development policies: a Canadian case
Rakhra, A. S.; Wilson, A. H.
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S e r
TH1
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National Research
Conseii national
no.
1539
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Institute for
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recherche en
Construction
construction
The
Building Market and
Development
Policies: A Canadian
Case
by A.S. Rakhra, and A.H. Wilson
A N A L Y Z E D
Appeared in
CIB Proceedings of the Fourth International
Symposium on Building Economics
Copenhagen 1987
Session D -The Building Market, p. 7-18
(IRC Paper No. 1539)
Reprinted with permission
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Ce document e s t d i s t r i b u g sous forme de tirC-A-part p a r 1 ' I n s t i t u t de r e c h e r c h e e n c o n s t r u c t i o n . On p e u t o b t e n i r une l i s t e d e s p u b l i c a t i o n s d e
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The B u i l d i n g Market and Development P o l i c i e s : A Canadian Case
Amrik S. Rakhra
I n s t i t u t e f o r Reseach i n C o n s t r u c t i o n N a t i o n a l Research Counci 1 Canada
Ottawa, O n t a r i o K I A OR6
Andrew H. W i 1 son
Consultant
,
Ottawa, CanadaKey words: Canadian b u i l d i n g market, f e d e r a l government p o l i c i e s . Summa r l
The n a t u r e and s i z e o f t h e Canadian b u i l d i n g market and i t s l i n k a g e s w i t h t h e o t h e r s e c t o r s a r e described t o demonstrate i t s importance t o t h e economy as a who1 e. Factors (Economic, demographic, e x t e r n a l
,
techno- l o g i c a l , e t c ) and development p o l i c i e s o f t h e federal government a f f e c t i n g t h e b u i l d i n g market i n Canada a r e analyzed. It i s observed t h a t t h eb u i l d i n g market i n Canada has been r e l a t i v e l y weak i n t h e past 10 years and i t i s expected t o be so i n t h e f u t u r e . The development p o l i c i e s o f t h e federeal government and t e c h n o l o g i c a l f a c t o r s have had no major impact on t h e s i z e o f t h e b u i l d i n g market.
Mots c l 6 : March6 imnobi 1 ie r au Canada, p o l i t i que du gouvernement f 6 d 6 r a l .
La n a t u r e e t l e s dimensions du march6 i m m o b i l i e r au Canada e t ses l i e n s avec d ' a u t r e s secteurs sont d g c r i t s pour en dgmontrer 1 'importance pour 1 '6conomie dans son ensemble. La documentation analyse l e s f a c t e u r s (Cconomi ques, d6mographi ques, externes
,
techno1 o g i ques,
e t c .)
e t 1 es pol i t i q u e s de dgveloppement du gouvernement f 6 d g r a l q u i i n f l u e n t sur l e march6 i m m o b i l i e r au Canada. On mentionne que l e march6 i m m o b i l i e rcanadiens a Ct6 r e l a t i v e m e n t f a i b l e au cours des d e r n i 6 r e s d i x ann6es e t on s ' a t t e n d
i
ce q u ' i l l e demeure dans l ' a v e n i r . Les p o l i t i q u e s dedgveloppement du gouvernement f6dGral e t l e s f a c t e u r s technologiques n ' o n t aucune i n c i d e n c e majeure sur l a dimension du march6 i m m o b i l i e r .
The B u i l d i n g Market and Development P o l i c i e s : A Canadian Case A m r i k S. Rakhra and Andrew H. Wilson
I n t r o d u c t i o n
The b u i 1 d i n g market ( e x c l udi ng c i v i 1 e n g i n e e r i n g ) i n Canada c o n s t i t u t e s an important economic a c t i v i t y . I n 1985, i t amounted t o $41 b i l l i o n , ( l ) 8.6%
o f Gross N a t i o n a l Product (GNP). About 38% o f t h e t o t a l c a p i t a l f o r m a t i o n o f t h e economy was a t t r i b u t e d t o t h e b u i l d i n g sector.
( 2 )
The b u i l d i n g s e c t o r provides d i r e c t employment t o approximately 400,000 workers; t h i s f i g u r e s exceeds 600,000 when those i n d i r e c t l y employed i n t h e manufacture, s a l e and t r a n s p o r t a t i o n o f b u i l d i n g m a t e r i a l s a r e included.Nature o f t h e B u i l d i n g C o n s t r u c t j o n Market
B u i l d i n g c o n t r u c t i o n i s an u n s t a b l e a c t i v i t y s u b j e c t t o business c y c l e f l u c t u a t i o n s and t h e t r e n d s o f t h e economy. Periods o f slow growths can be f o l l o w e d q u i c k l y b y p e r i o d s o f boom. D u r i n g times o f slow growth, t h e demand f o r b u i l d i n g c o n s t r u c t i o n can he e a s i l y postponed, w h i l e i n boom p e r i o d s t o o many owners may s t a r t b u i l d i n g simultaneously. I n s t a b i 1 i t y i n b u i l d i ng c o n s t r u c t i o n imposes c e r t a i n economic and s o c i a l c o s t s i n t h e form o f h i g h e r l a b o u r and m a t e r i a l c o s t s , h i g h e r unemployment r a t e s , i n d u s t r i a l r e l a t i o n s problem, etc.
Impact o f t h e B u i l d i n g Market
Changes i n b u i l d i n g a c t i v i t y a f f e c t o t h e r s e c t o r s o f t h e economy through economic "1 inkages"
,
such as t h e purchase o f c o n s t r u c t i o n m a t e r i a1 s and s e r v i c e s from t h e manufacturing and s e r v i c e i n d u s t r i e s .The i n d u s t r y i s an i m p o r t a n t consumer o f metal f a b r i c a t e d products, lumber and plywood, o t h e r wood products, i r o n and s t e e l , cement and concrete, and who1 e s a l e services. Changes i n b u i l d i n g a c t i v i t y w i 11 t h u s cause changes i n o u t p u t and employment l e v e l s i n these i n d u s t r i e s . The impact o f these changes w i l l be a m p l i f i e d when t h e changes f i l t e r down t o those who supply raw o r semi -processed b u i l d i n g m a t e r i a l s t o t h e m a t e r i a l manufacturers. For example, f o r every $100 o f c o n s t r u c t i o n cost, t h e
b u i l d i n g i n d u s t r y spends n e a r l y $36 on m a t e r i a l s , $32 on labour, $17 on purchase o f business, personal, c a p i t a l , and o t h e r s e r v i c e s , and $5 on taxes; $10 goes towards p r o f i t s . ( 3 )
Linkages can be increased, i n v e s t o r and consumer spending may be induced by c o n s t r l r c t i o n waqc. incomes and c o r p o r a t e incomes. The t o t a l e f f e c t s
o f
a l l types of
1
inkages a r e n o r m a l l y r e f e r r e d as " m u l t i p l i e r " o r " r i p p l e " e f f e c t s . The 1980 Canadian Input-Output Tables, which d e s c r i b e t h e i n t e r - dependence o f t h e v a r i o u s s e c t o r s o f t h e economy, ind,icate t h a t a d o l l a r spent i n t h e purchase o f c o n s t r u c t i o n o u t p u t w i l l generate a m u l t i p l i e r e f f e c t worth $1.83 i n t h e whole economy; t h i s compares w i t h $1.72 f o r a g r i c u l t u r e , $1.95 f o r most o f t h e manufacturing i n d u s t r i e s , $1.70 f o r t r a n s p o r t a t i o n , and $1.56 f o r business sevices. ( 4 ) The impacts o f mu1 t i-
p l i e r e f f e c t s , however, a r e n o t f e l t e q u a l l y i n t h e v a r i o u s regions of t h e country. For example, a study by t h e Economic Council o f Canada i n t h e seventies found t h a t 47% o f c o n s t r u c t i o n m a t e r i a l requirements i n t h e A t l a n t i c Region were met by Ontario, 23% by Quebec and o t h e r provinces, and o n l y 30% from l o c a l sources,(5) This means t h a t t h e mu1 t i p 1 i e r e f f e c t s of b u i l d i n g a c t i v i t y i n t h e A t l a n t i c Region do n o t s t a y i n t h e region, b u t
s p i l l over t o o t h e r regions through what a r e c a l l e d leakages. Trends i n t h e B u i l d i n g Market: A Sectoral A n a l y s i s
The demand f o r b u i l d i n g s i s almost e n t i r e l y generated by t h e o t h e r s e c t o r s o f t h e economy. The l a r g e s t s i n g l e c l i e n t i n t h i s market i s housing
s e c t o r , f o l l o w e d by t h e finance, insurance and r e a l e s t a t e sector, manu- f a c t u r i n g , i n s t i t u t i o n a l s e r v i c e s and government departments (see Table 1). As t h i s Table shows, i n 1985, t h e housing s e c t o r provided 60% of t h e b u i l d i n g market i n Canada, f o l l o w e d by 11% f o r finance, insurance and r e a l e s t a t e , 7% f o r manufacturing and t h e remaining 22% f o r o t h e r s e c t o r s o f t h e economy.- The share o f housing grew from 57% i n 1975 t o 60% i n 1985, t h a t of finance, insurance and r e a l e s t a t e from 8% t o 11%, w h i l e t h a t o f mining, q u a r r y i n g and o i l w e l l s was halved from 2% i n 1975 t o 1% i n 1985. The share of t h e f o r e s t r y , comnercial s e r v i ces and government departments s e c t i o n s o f t h e market a1 so decl ined.
B u i l d i n g market has two components
- -
new and r e p a i r s and renovations. The l a t t e r i n c l ude maintenance, r e p a i r s and replacements, a d d i t i o n s , a1 t e r a t i ons, and improvements. The r e p a i r s and r e n o v a t i on market has been growing much f a s t e r t h a n t h e new market, e s p e c i a l l y . l'n t h e housing sector. The p r o p o r t i o n o f r e p a i r s and r e n o v a t i o n market i n t h e housing sector, f o r example, grew s i g n i f i c a n t l y from 35% i n 1977 t o 55% i n 1985.Table 1
T o t a l Value o f t h e Canadian B u i l d i n g Market and Percentage Changes by I n d u s t r y For Various Years and Periods I n d i c a t e d
( i n
m i l l
i o n s o f d o l l a r s ) % ChangesA g r i c u l t u r e and F i s h i n g 435 878 910 102 4
F o r e s t r y 20 41 19 105 -51
Mining, Q u a r r y i n g and O i l Wells 31 8 658 411 107 -38
B u i l d i n g C o n s t r u c t i o n 98 199 254 103 28
Manufacturing U t i l i t i e s Trade
Finance, Insurance
&
Real Commercial Servi cesHousing I n s t i t u t i o n a l Services Government Departments 1 174 594 429 E s t a t e 1 544 892 10 665* 1 334 1 080 Total 1 8 583 29 091 40 761 56 40
*
RevisedSource: S t a t i s t i c s Canada
-
C o n s t r u c t i o n i n Canada, Cat. No. 64-201v a r i o u s issues, and f i g u r e s obtained from Gross National Product D i v i s i o n o f S t a t i s t i c s Canada.
C l o s e l y r e l a t e d t o t h e t r e n d o f r e n o v a t i o n a c t i v i t y t o grow i s t h e growth t r e n d f o r bui l d i n g c o n s t r u c t i o n performed by p r i v a t e home owners and f i r m s n o t p r i m a r i l y engaged i n t h e b u i l d i n g i n d u s t r y , f o r example b u i l d i n g undertaken by t h e l a b o u r f o r c e s o f t h e primary, manufacturing, t r a d e , finance, comnercial
,
r e s i d e n t i a l and i n s t i t u t i o n a l s e c t o r s and p r i v a t e home owners. The share o f such sub-sectors grew from 6% i n 1975 t o 11% i n 1980 and 20% i n 1985.The market when broken down by t y p e o f s t r u c t u r e has not, however, changed s i g n i f i c a n t l y d u r i n g t h e l a s t decade. The r e l a t i v e share o f r e s i d e n t i a l c o n s t r u c t i o n has gone up s l i g h t l y , b u t those o f i n d u s t r i a l ,
commercial
,
i n d u s t r i a l,
i n s t i t u t i o n a l and o t h e r have n o t changed much (see Table 2).Table 2
Value o f C o n s t r u c t i o n Work Performed P r i n c i p a l Type o f B u i l d i n g C o n s t r u c t i o n 1975, 1980, 1985 ( i n m i l l i o n s o f d o l l a r s ) B u i l d i n g
%
o f t o t a l%
o f t o t a l%
o f t o t a l C o n s t r u c t i o n 1975 b u i l d i n g * 1980 b u i l d i n g * 1985 b u i l d i n g s * R e s i d e n t i a l 10 665 57 16 423 5 6 24 175 5 9 I n d u s t r i a l 1 510 8 3 005 10 3 216 8 Commerc i a 1 3 732 2 0 5 912 2 0 8 201 2 0 I n s t i t u t i o n a l 1 561 8 2 157 8 3 143 8 Other 1 117 6 1 594 6 2 025 5 TOTAL 1 8 5 8 5 100 2 9 0 9 1 100 40 760 100Sources: S t a t i t i c s Canada, Revised C o n s t r u c t i o n Expenditures, CANSIM
Series, Sept 8, 1986, and S t a t i s t i c s Canada, C o n s t r u c t i o n i n
Canada, Cat.No.64-201, v a r i o u s issues.
*
May n o t add t o 100 because o f rounding.F a c t o r s A f f e c t i n g t h e B u i l d i n g Market i n Canada
B u i l d i n g market depends on demographics, economic, e x t e r n a l and s o c i a l f a c t o r s , energy, government p o l i c i e s and t e c h n o l o g i c a l f a c t o r s .
Demographic Trends
Demographically, t h e Canadian p o p u l a t i o n has been d e c l i n i n g . I t i s a l s o
aging, and household f o r m a t i o n has slowed, e s p e c i a l l y among young people. These t r e n d s a r e expected t o c o n t i n u e f o r t h e n e x t 10-15 years, b a r r i n g
any major change i n i m n i g r a t i o n p o l i c y . It i s p r o j e c t e d t h a t , on t h e
average, about 256 000 persons
w i l l
be added t o t h e Canadian p o p u l a t i o nevery y e a r between 1986 and 1991.(6) T h i s r a t e i s expected t o d e c l i n e t o
236 000 i n t h e 1991-1996 period. Growth over t h e next t e n years w i l l be
dominated by increases i n t h e 35-54 y e a r and 65 y e a r and over age groups and d e c l i n e s i n t h e 15-24 year and 25-34 year age groups.
The i m p l i c a t i o n s o f these demograhic t r e n d s a r e g r e a t e r f o r r e s i d e n t i a l than f o r n o n - r e s i d e n t i a l c o n s t r u c t i o n . The growth i n t h e 45-54 year age
group, f o r example, impl i e s t h a t middle-aged persons w i 11 dominate t h e housing market i n t h e 1980s and '90s. More a t t e n t i o n w i l l have t o be p a i d t o t h e i r preferences and requirements. S i m i l a r l y , a r i s e i n t h e number o f e l d e r l y suggests t h a t g r e a t e r c o n s i d e r a t i o n must be g i v e n t o t h e i r s p e c i a l needs i n terms o f " f u n c t i o n a l i t y " and " a c c e s s i b i l i t y " . A d e c l i n i n g growth
r a t e i n household f o r m a t i o n impl i e s a decrease i n housing requirements. A
CMHC study f o r e c a s t s t h a t annual housing r e q u i rements
w i
11 decl i n e t o 105 000 between 1996 and 2001,f7) down from 165 000 i n 1985.Economic F a c t o r s
Factors such as general l e v e l o f economic a c t i v i t y , disposable income, t h e response o f housing expenditures t o changes i n t h e l e v e l o f income (income e l a s t i c i t y o f demand f o r housing), i n t e r e s t r a t e s , i n f l a t i o n l e v e l s , and e x t e r n a l f a c t o r s such as w o r l d o i l p r i c e s and t h e US i n t e r e s t r a t e s , a l l i n f l u e n c e b u i l d i n g a c t i v i t y . General economic a c t i v i t y l e v e l can be repre- sented by growth r a t e and t h e l e v e l o f n a t i o n a l income, l e v e l o f c a p a c i t y u t i l i z a t i o n o f t h e n a t i o n a l economy and o f t h e i n d u s t r y i n which con- s t r u c t i o n investment i s t o be determined, unemployment r a t e , etc. A
decl i n i n g l e v e l o f n a t i o n a l income and a r i s i n g l e v e l o f general unemploy- ment r a t e s a r e l i k e l y t o dampen t h e demand f o r c o n s t r u c t i o n investment. High i n t e r e s t r a t e s w i 11 discourage p o t e n t i a l home owners from buying new homes. High US r a t e s a r e l i k e l y t o push Canadian r a t e s up and hence
adversely a f f e c t Canadian c o n s t r u c t i o n investment. A domestic monetary pol i c y o f s u p p o r t i n g t h e Canadian d o l l a r by u s i n g i n t e r e s t r a t e s w i l l a l s o h u r t c o n s t r u c t i o n a c t i v i t y .
World o i l p r i c e s a f f e c t c o n s t r u c t i o n a c t i v i t y i n two ways. F i r s t , d e c l i n i n g w o r l d o i l p r i c e s w i l l l e a d t o t h e c a n c e l l a t i o n o r postponement of proposed o i l and gas p r o j e c t s and t h e s u p p o r t i n g c o n s t r u c t i o n
f a c i l i t i e s and b u i l d i n g s . The second e f f e c t o f d e c l i n i n g o i l p r i c e s w i l l
be p o s i t i v e : lower p r i c e s f o r consumer and producer goods w i t h h i g h energy content. This w i 11 r e s u l t i n h i g h e r demand f o r t h e expansion o f p l a n t s and warehouse b u i l d i n g s . A lower l e v e l o f p r i c e s w i l l slow down t h e i n f l a t i o n l e v e l , which i n t u r n w i l l a l l o w monetary a u t h o r i t i e s t o lower i n t e r e s t rates. Assuming t h e l e v e l o f income remains t h e same, lower i n f l a t i o n l e v e l s l e a v e more income w i t h t h e consumer t o spend. I f he decides t o spend t h i s a d d i t i o n a l income on housing, t h e demand f o r housing w i l l
increase. A lower i n f l a t i o n l e v e l may l e a d t o lower p r i c e s f o r b u i l d i n g m a t e r i a l s and o t h e r services. T h i s may l o w e r t h e i n i t i a l cost o f b u i l d i n g s
Outlook of t h e B u i l d i n g , Market i n Canada 1986-1995
Rased on t h e i n f l u e n c e of t h e above f a c t o r s on t h e b u i l d i n g market, t h e near term (1-2 y e a r ) o u t l o o k f o r r e s i d e n t i a l c o n s t r u c t i o n i n Canada i s
1 i k e l y t o be p o s i t i v e . Forecasts d i f f e r , however, w i t h regard t o t h e medium t o l o n g term f o r e c a s t s i n c e t h e i r assumptions d i f f e r .
According t o a f o r e c a s t commissioned by t h e I n s t i t u t e f o r Research i n Construction, average annual housing s t a r t s w i l l i n c r e a s e i n t h e 1986-1990 p e r i o d t o 167 000 u n i t s , compared w i t h 153 000 i n 1981-1985 (Table 3). Regionally, t h e expected i n c r e a s e i n average annual s t a r t s i s due m a i n l y t o a p r o j e c t e d r i s e i n Ontario. Startes i n t h e P r a i r i e p r o v i n c e s
( p a r t i c u l a r l y A l b e r t a ) and B r i t i s h Columbia a r e p r o j e c t e d t o d e c l i n e from t h e average annual l e v e l o f 1981-1985. A decl i n e t o an average 143 000 u n i t s per year i s p r o j e c t e d f o r 1991-1996. A l l regions, except t h e P r a i r i e provinces, a r e f o r e c a s t t o share i n t h e d e c l i n e i n s t a r t s .
Table 3
Average annual housing s t a r t s by r e g i o n o f Canada 1976-1995
Actual P r o j e c t e d 1976-1 980 1981-1
985
1986-1 990 1991-1995 Regi on Thousands o f U n i t s A t l a n t i c Quebec O n t a r i o P r a i r i e s B.C. Canada A t l a n t i c Quebec O n t a r i o P r a i r i e s B.C. Canada%
D i s t r i b u t i o n by Regi on* 7 7 7 7 2224
25 24 30 33 41 40*
Percentages may n o t add up t o 100% due t o rounding Source: CMHC and Clayton Research AssociatesI n terms o f d o l l a r value, t o t a l r e s i d e n t i a l c o n s t r u c t i o n expenditures (new p l u s r e n o v a t i o n ) a r e p r o j e c t e d t o r i s e from an annual average o f
$20.12 b i l l i o n i n 1981-1985 t o $26.23 b i l l i o n i n 1986-1990 and $27.65
b i 1 1 i o n i n 1995, a l l i n constant (1985) d o l l a r s (Table 4). Renovation
work, which i s a l r e a d y a l a r g e p a r t o f r e s i d e n t i a l c o n s t r u c t i o n , w i l l
account f o r an i n c r e a s i n g l y l a r g e share throughout t h e n e x t decade. By
1990-1995, r e n o v a t i o n work should account f o r 67% o f t o t a l r e s i d e n t i a l
c o n s t r u c t i o n , compared t o 63% i n 1986-1990 ( F i g u r e 1). I n t e r e s t i n g l y enough, t h e average annual value o f r e n o v a t i o n work d u r i n g 1986-1990 i s expected t o exceed t h a t o f new r e s i d e n t i a l c o n s t r u c t i o n work by 29%.
Table 4
R e s i d e n t i a l c o n s t r u c t i o n expenditures by t y p e and r e g i o n o f Canada, annual averages f o r 1981-1985, 1986-1990, 1991-1995
( m i l l i o n s o f d o l l a r s )
1981 -1985 1986-1990 1991-1995
Region New Renovati on T o t a l New Renovati on T o t a l New Renovati on T o t a l
A t l a n t i c 624 700 1324 720 1200 1920 566 1400 1966 Quebec 2069 3000 5069 2521 4100 6621 2073 4800 6873 O n t a r i o 3462 4002 7464 5198 5600 10798 4343 6800 11143 P r a i r i e s 1711 1730 3441 1709 2217 3926 1755 2675 4430 0 . C, 1548 1278 2826 1350 1700 3050 1242 2000 3242 Canada 9414 10710 20124 11498 14817 26315 9979 17675 27654
T o t a l s may n o t be exact due t o rounding
Sources: S t a t i s t i c s Canada and Clayton Research Associates, prepared f o r I R C , J u l y 1985 ( r e v i s e d i n September 1986).
The i n c r e a s i n g share o f r e n o v a t i o n may f o r c e c o n s t r u c t i o n f i r m s
s p e c i a l i z i n g i n new c o n s t r u c t i o n t o d e v e r s i f y t h e i r
activities
t o i n c l u d e r e p a i r s . T h i s d i v e r s i f i c a t i o n w i l l be e a s i e r f o r small f i r m s t h a n f o r b i g firms. R i s i n g r e n o v a t i o n c o n s t r u c t i o n may a l s o p r o v i d e an i n c e n t i v e t o s k i l l e d tradesmen t o become c o n t r a c t o r s f o r r e n o v a t i o n work. As a r e s u l t , t h e number o f c o n s t r u c t i o n f i rms w i 11 increase, causing more fragmentation o f t h e i n d u s t r y .Table 5
Levels and Growth Rates o f Non-Residential B u i l d i n g Market i n Canada
For Various Years (1981 d o l l a r s i n m i l 1 io n s )
1986 1987 1988 1989 1990 1995 N o n - r e s i d e n t i a l T o t a l 1 2 4 9 6 1 3 3 3 7 1 4 4 1 4 1 4 8 8 7 1 5 2 5 4 1 5 1 1 0 I n d u s t r i a l 2 022 2 382 2 708 3 044 3 289 3 688
-
Commercial 6 326 6 736 7 334 7 370 7 411 7 376 * I n s t i t u t i o n a l 2 630 2 579 2 613 2 621 2 639 2 743 Other 1 518 1 640 1 759 1 852 1 915 1 903Percentage Annual Growth Rates
1986-87 1987-88 1988-89 1989-90 1986-90 1990-95 N o n - r e s i d e n t i a l T o t a l 5.1 6.7 8.1 3.3 5.1 3.0 I n d u s t r i a l 12.9 17.8 13.7 12.4 8.0 12.13 Commercial 4.0 6.5 8.9 0.5 0.6 3.0 I n s t i t u t i o n a l 0.00 -1.9 1.3 0.3 0.7 1.2 Other 6.0 8.1 7.3 5.3 3.4 2.4 Source: I n f o r m e t r i ca Ltd., Ottawa Outlook f o r N o n - r e s i d e n t i a l C o n s t r u c t i o n
C o n s t r u c t i o n f o r e c a s t i n g f i r m s such as I n f o r m e t r i c a and Canadata b e l i e v e t h a t w h i l e t h e s h o r t term o u t l o o k f o r n o n - r e s i d e n t i a l c o n s t r u c t i o n has been dampened by t h e r e c e n t s l i d e i n w o r l d o i l p r i c e s , t h e l o n g term o u t l o o k over t h e next 10-15 y e a r s l o o k s q u i t e encouraging. The sudden d e c l i n e i n o i 1 p r i c e s
w i l l
r e s u l t i n t h e c a n c e l l a t i o n o r postponement o f o i 1 -r e l a t e d p r o j e c t s and t h i s w i 11 a f f e c t c o n s t r u c t i o n a c t i v i t y i n t h e o i l -producing provinces. On t h e o t h e r hand, d e c l i n i n g o i l p r i c e s w i l l boost t h e economies o f o i l consuming p r o v i n c e s and, on balance, t h eo v e r a l l impact o f t h e o i 1 p r i c e decl i n e on t h e Canadian economy w i 11 be
p o s i t i v e . They b e l i e v e , however, t h a t a f t e r 1987, o i l p r i c e s may f i r m up
and o i l and gas c o n s t r u c t i o n may resume i t s p r e v i o u s r a p i d growth.
D e s p i t e t h e near t e r m weakness i n c o n s t r u c t i o n a c t i v i t y i n t h e o i l and gas producing provinces, I n f o r m e t r i c a f o r e c a s t s t h a t c o n s t r u c t i o n i n t h e
l o n g run w i l l remain one of t h e key c o n t r i b u t o r s t o gross n a t i o n a l income, n o t because o f i t s spectacular performance, b u t because o f i t s sheer size. ( 8 ) N o n - r e s i d e n t i a l c o n s t r u c t i o n ( e x c l u d i n g e n g i n e e r i n g ) i s expected t o experience r e l a t i v e l y h i g h growth d u r i n g 1986-1990 (5.1% annual
average), compared w i t h t h e 1990-1995 p e r i o d (3.0
%).
The i n d u s t r i a l s e c t o r i s expected t o outperforrn every o t h e r s e c t o r because o f t h e low energy p r i c e s , f o l lowed by o t h e r b u i l d i n g s and commercial secotors (See Table 5).Uevel opment Pol i c i es
Technology u s u a l l y has r e l a t i v e l y 1 i t t l e i n f l u e n c e on t h e market i n t h e sense t h a t t e c h n o l o g i c a l changes g i v e r i s e t o more o r l e s s b u i l d i n g a c t i v i t y . An exception i n r e c e n t years has been t h e energy c r i s i s , where technology responded q u i c k l y t o demand and r e i n f o r c e d demand f o r new and renovated b u i l d i n g s w i t h added i n s u l a t i o n . Another 1 esser exception has been t h e t r e n d t o "smart" b u i l d i n g s and t h e a p p l i c a t i o n o f e l e c t r o n i c c o n t r o l s i n b u i l d i n g s . The advent o f CAD systems has i n f l u e n c e d t h e process o f design b u t n o t n e c e s s a r i l y t h e end-resul t s o f design.
The a p p l i c a t i o n o f b u i l d i n g codes and standards has i n f l u e n c e d and w i l l
c o n t i n u e t o i n f l u e n c e t h e techno1 ogy of b u i l d i n g b u t i n an evol u t i o n a r y r a t h e r than a r e v o l u t i o n a r y way. The p r i n c i p a l source o f new b u i l d i n g technology i s t h e manufacturing s e c t o r o f i n d u s t r y , and t h e sales
r e p r e s e n t a t i v e s o f t h e i n d i v i d u a l companies, s u p p l i e r s etc. a r e among t h e most i m p o r t a n t technology t r a n s f e r agents. I n r e c e n t y e a r s no s i g n i f i c a n t changes i n these peoples' a c t i v i t i e s have been n o t i c e d . A t t h e same time, however, t h e a c t i v i t i e s o f t h e s p e c i a l i z e d a s s o c i a t i o n s w i t h i n t h e
b u i l d i n g i n d u s t r y have continued. Again, changes t o b u i l d i n g p r a c t i c e have been evol u t i onary r a t h e r than rev01 u t i o n a r y .
I n s p i t e o f t h e above, t h e members o f t h e b u i l d i n g i n d u s t r y i n Canada would agree t h a t technology i s a v i t a l i n g r e d i e n t i n t h e b u i l d i n g process and hds i m p o r t a n t p a r t s t o p l a y i n both t h i s process and t h e use o f
b u i l d i n g s once they, have been completed.
The federal government i n Canada has had t e c h n o l o g i c a l i n n o v a t i o n and R & D support programs i n p l a c e f o r o v e r 25 years. These programs have, however, been d i r e c t e d p r i n c i p a l l y a t t h e manufacturing sector. The b u i l d i n g s e c t o r has b e n e f i t t e d p r i n c i p a l l y i n so f a r as t h e manufacturers supplying t h e i n d u s t r y w i t h m a t e r i a l s and equipment have taken advantage o f t h e programs. The I n d u s t r i a l Research Assistance Program (IRAP)
t o t h e c o n s t r u c t i o n f i r m s , as i t was m a i n l y designed f o r manufacturing firms. U n f o r t u n a t e l y , no s t u d i e s o f these programs have i d e n t i f i e d
b u i l d i n g - r e l a t e d e f f e c t s . I n a d d i t i o n , a v a r i e t y o f tax-based i n c e n t i v e s has been a v a i l a b l e t o a l l p r i v a t e s e c t o r companies performing R & D t h a t q u a l i f i e d under t h e terms and c o n d i t i o n s o f t h e i n c e n t i v e s . One o f t h e most w i d e l y used o f t h e t a x i n c e n t i v e s has been an investment c r e d i t , One of t h e l e a s t successful has been t h e program through which companies c o u l d s e l l f u t u r e t a x c r e d i t s f o r R & D t o t h i r d p a r t i e s t h e r e b y
-
i n t h e o r y a t l e a s t-
r a i s i n g funds f o r t h e work i t s e l f . This program was b a d l y abused and was withdrawn by t h e present government a f t e r o n l y a s h o r t t i m e i n use. B e n e f i t s o f these i n c e n t i v e s t o manufacturing f i r m s as fewc o n s t r u c t i o n f i r m s were engaged i n R
&
D a c t i v i t i e s .For many years t h e b u i l d i n g research a c t i v i t i e s o f t h e f e d e r a l government were modestly b u t regul a r l y funded. Most estimates o f
b u i l d i n g - r e l a t e d R
&
D i n Canada p l a c e t h i s government's c o n t r i b u t i o n t o t h e n a t i o n a l t o t a l a t about 50 p e r cent. t h e p r i n c i p a l performer o f b u i l d i n g - r e l a t e d R & D was t h e N a t i o n a l Research Council b u t o t h e r s such as t h e Department o f Energy, Mines and Resources and t h e Department o f Pub1 i c Works were a l s o a c t i v e . The Canada Mortgage and Housing C o r p o r a t i o n was more a sponsor than a performer o f h o u s i n g - r e l a t e d R & D. Departments such as A g r i c u l t u r e have a l s o had R&
D a c t i v i t i e s .The p r i n c i p a l f e d e r a l technology t r a n s f e r agent has been t h e National Research Counci 1
,
and i n p a r t i c u l a r t h e formerD i
v i s i o n o f Bui 1 d i n g Research and t h e Canada I n s t i t u t e f o r S c i e n t i f i c and TechnicalInformation. NRC a l s o had a v a i l a b l e t o i t t h e a d v i c e o f t h e Canadian
Committee on Bui l d i n g Research which spent a s i g n i f i c a n t p r o p o r t i o n o f i t s t i m e between 1980 and 1984 s t u d y i n g technology t r a n s f e r .
Over t h e past two y e a r s t h e s i t u a t i o n has changed a t t h e f e d e r a l l e v e l . The present government's wish t o c u t f e d e r a l expenditures has l e d t o r e d u c t i o n s i n i t s f u n d i n g o f many k i n d s o f research and development, i n c l uding those f o r b u i l d i n g . W i t h i n t h e NRC t h e f u n d i n g r e d u c t i o n s have been accompanied by changes i n o r g a n i z a t i o n a f f e c t i n g t h e D i v i s i o n o f B u i l d i n g Research and t h e Committee on B u i l d i n g Research (CCBR). The
former i s now t h e I n s t i t u t e f o r Research i n C o n s t r u c t i o n , w i t h an expanded mandate t o undertake work on b e h a l f o f p r i v a t e and p u b l i c sponsors t o
a
much g r e a t e r degree than i n t h e past. At t h e same time, i t s personnel have been cut. The CCBR has been r e c o n s t i t u t e d as t h e Canadian C o n s t r u c t i o n Research Board (CCRB), w i t h an expanded mandate. N e i t h e r t h e new I n s t i t u t e
nor t h e Board has had t i m e y e t t o i n f l u e n c e t h e b u i l d i n g process o r t h e i n d u s t r y i n any s i g n i f i c a n t way.
To sum up, i t i s u n l i k e l y t h a t t h e f e d e r a l p o l i c i e s a f f e c t i n g b u i l d i n g technology w i 11 have much i n f l u e n c e on t h e b u i l d i n g market i n Canada over t h e next few years. The government i s i n t h e process o f making s i g n i f i c a n t changes w i t h i n i t s departments and agencies, and t h e f i n a l outcome of these i n r e l a t i o n t o b u i l d i n g
i s
f a r from c e r t a i n . The government's main p o l i c y t h r u s t , however, i s c l e a r l y t o have t h e p r i ' v a t e s e c t o r f i l l more o f i t s research and i n f o r m a t i o n needs than has been t h e case. The fragmented n a t u r e o f t h e b u i l d i n g i n d u s t r y i s n o t l i k e l y t o a s s i s t t h i s process. ReferencesS t a t i s t i c s Canada, C o n s t r u c t i o n Expenditures ( r e v i s e d ) CANSIM Series, J u l y 1986, Ottawa.
S t a t i s t i c s Canada, P r i v a t e and P u b l i c Investment i n Canada: Outlook, Cat. No 61-205, Annual, M i n i s t e r o f Supply and Services, Canada, Ottawa 1986.
The Canadian C o n s t r u c t i o n I n d u s t r y :
A
Sector P r o f i1
e, Department o f Regional I n d u s t r i a l Expansion, Ottawa 1984.S t a t i s t i c s Canada, The Input-Output S t r u c t u r e o f t h e Canadian Economy, 1971 -80, Cat. No 15-201E, M i n i s t e r o f Supply and Servi ces
,
Canada, Ottawa 1984.Economic Council o f Canada, Toward More S t a b l e Growth i n C o n s t r u c t i o n , I n f o r m a t i on Canada, Ottawa, 1974.
Clayton Research Associates Ltd., The Out1 ook f o r R e s i d e n t i a l
Construction, prepared f o r t h e I n s t i t u t e f o r Research i n Construction, National Research Council o f Canada, Ottawa, June 1986.
A. Di v i c, Population, Households and Housing Requi rements
,
P r o j e c t i o n s f o r Canada, The Provinces and t h e Census M e t r o p o l i t a n Areas,1976-2001, Canada Mortgage and Housing Corporation, Ottawa, 1981. I n f o r m e t r i c a L i m i t e d , P r o v i n c i a l C o n s t r u c t i o n Outlook t o 2005, Revised C o n s t r u c t i o n Outlook and Supplementary Tables, Ottawa, June 1986.
