Construction

Construction activity in the Province was somewhat lower last year. The major driver of the industry in recent years -- the Hibernia project -- began to wind down, negatively impacting the non-residential sector. On the other hand, a resurgence in housing starts gave the residential component a boost. Overall, construction employment averaged 9,800 compared to 10,700 in the previous year.

Non-Residential

Hibernia continued to be an important contributor to the non-residential construction sector last year. Employment at Bull Arm, the project's single largest construction site, averaged 4,000 in 1996, compared with 4,800 in the previous year. Construction is virtually complete (see Oil and Gas) and the project will proceed into the production phase. Other non-residential construction was constrained by lower capital investment by both the public and private sectors.

Several major construction projects have been recently announced that will infuse considerable investment and employment into the Province in the coming years. Probably the most significant is the nickel smelter and refinery to be located at Argentia and the mine and mill at Voisey's Bay. Some other major projects that have been announced include: the Terra Nova oil project; the crude oil transshipment terminal at Whiffen Head; the redevelopment of hospital services in the St. John's area; and the relocation of the Davis Inlet Innu community to Sango Bay. For a more detailed overview of major construction activity in the Province, readers are directed to the major project inventory at the end of this report.

The Canada/Newfoundland Infrastructure Works Agreement has been an important contributor to non-residential construction in recent years. The Federal government, in the February 1997 Budget, extended the Agreement by one year until March 1998, adding another $30.9 million to the $147.1 million to be spent in the Province under the original program.

Residential Activity

The Provincial housing market performed better than anticipated last year, due in large part to very favourable mortgage interest rates. Both one and five year rates declined steadily in 1995 and 1996, reaching 5.20 and 6.95 percent respectively by the end of December, the lowest levels recorded since 1965. Overall, new home construction rose by 18.8 percent to 2,034 units, with much of the growth occurring in the St. John's area. Low mortgage rates also provided a boost to St. John's MLS® sales, which normally accounts for 90 percent of Provincial activity. Sales were up by nearly 22 percent to 1,915 units over the previous year with most activity covering the resale of existing units.

Outlook

Employment in the construction industry will be dampened again this year by the completion of Hibernia construction and an expected decline in housing starts. While the latest survey of investment intentions by Statistics Canada predicts capital investment in the Province will grow by 6.0 percent in 1997, construction employment is nevertheless expected to decline as a much larger share of spending is directed towards material and equipment purchases.

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