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This year will see an increase in residential construction; however, non-residential building will head in the opposite direction with a decline in spending on commercial and industrial facilities.

Residential and non-residential construction will be heading in opposite directions this year—the former is expected to increase, while the latter will decrease to a six-year low.

According to the Conference Board of Canada, housing starts are forecasted to jump from 147,600 units in 2009 to 180,500 this year. New home prices will increase by 2.4 per cent and will continue to experience growth between 2011 and 2014. Pre-tax profits in the residential construction industry are predicted to rebound from a four-year low to reach $2.7 billion in 2010.

Michael Burt, the group's associate director for industrial economic trends, said the number of housing starts has improved since bottoming out last spring, and prices are expected to reverse their decline.

As for the non-residential industry, declining spending on commercial and industrial buildings is more than offsetting a rise in spending on institutional structures. Total investment is expected to fall by 2.3 per cent this year. Industry profits will decline by 19 per cent to $918 million in 2010, but should begin to recover in 2011. However, they are not expected to return to their pre-recession peak until 2014.

"Part of the reason for the divergence in performance is spending on housing tends to coincide with economic activity, while changes in spending on non-residential structures tends to lag changes in broad economic activity," Burt told Construction Canada Online. "Thus, with the economy now in recovery mode, housing activity is improving after experiencing a sharp correction in the first half of 2009. Non-residential construction activity was slower to experience a correction, and will be slower to turnaround due to the lag between when buildings are proposed and permitted to when they are actually completed. More fundamentally, housing is being supported by a variety of factors, including low mortgage rates, improving consumer confidence, the return of job creation, and some pent-up demand from the period of weakness in late 2008 and early 2009."

Burt added some activity has also likely been pulled forward due to one-time policy changes, such as the end of the home renovation tax credit, and the impending harmonization of GST and PST in Ontario and British Columbia. This will increase the price for high-end new homes and a variety of services associated with home buying.