The Canadian market is very receptive to U.S.-made building products and has historically regarded U.S. companies as leaders in innovative and well-designed HVAC equipment. The close proximity of the United States to Canada allows U.S. companies easy access to Canadian distribution channels and advertising media. Furthermore, tariff-free entry under NAFTA gives U.S. HVAC equipment manufacturers an advantage in selling to Canada. The Canadian housing market has remained largely sheltered from the effects of the current economic crisis and unlike the housing market in the United States, has already begun a quick recovery in the second half of 2009. Demand for HVAC equipment is once again on the rise, creating opportunities for U.S. suppliers of HVAC equipment.
Canadian demand for HVAC equipment has increased by 17 percent over the past five years and the demand for U.S. products has increased by 13 percent during this same period. This growth has been a direct result of active residential and non-residential construction as well as renovation markets. During the fourth quarter of 2008, Canadian HVAC manufacturers reported a three percent increase in the Canadian demand for residential air conditioning bringing the number of units up to 10,952. The largest growth in demand was for ductless split systems that consist of heat pumps and conditioning condensing units, and for which Canadian demand increased by 36 percent from 2,711 units in the fourth quarter of 2007 to 4,216 in the fourth quarter of 2008. Meanwhile, commercial air conditioning shipments decreased 17 percent from 13,183 in the fourth quarter of 2007 to 10,952 in the fourth quarter of 2008. Residential furnace shipments also decreased, falling by 6 percent from 101,293 to 95,499.
Like most countries, Canada did not escape the effects of the current global economic slump and as a result market sales of HVAC products fell in the first quarter of 2009. According to the Heating, Refrigeration and Air Conditioning Institute of Canada (HRAI), as of February 2009 demand for most HVAC products had already slipped substantially since the fourth quarter of 2008. Canadian manufacturers of HVAC products for the Canadian market saw a 6 percent decline in commercial air conditioning and residential furnace shipments, and a 9 percent decline in unit heaters shipments. Demand for ductless split systems and residential air conditioning were the only products for which there continued to be increasing demand.
Despite its inability to isolate itself from the global economic crisis, the Canadian economy is seeing a quicker recovery than the United States. The Canadian housing market has already begun a quick recovery due to low interest rates and the introduction of a number of government incentive programs.
As a form of stimulus meant to aid with economic recovery, the Government of Canada began offering two incentives:
(1) A GST/HST New Housing Rebate - This program provides a tax rebate on the construction or purchase of most newly constructed or substantially renovated houses.
(2) An HRTC (Home Renovation Tax Credit) - This is a non-refundable tax credit for Canadian homeowners based on eligible expenses for improvements to a house, condo or cottage. The expenses can be claimed on their Canadian 2009 income tax return. It applies to eligible purchases made after January 27, 2009, and before February 1, 2010. The HRTC applies to eligible expenses of more than $1,000, but not more than $10,000, resulting in a maximum non-refundable tax credit of $1,350 [($10,000 ? $1,000) × 15%]. There has been some speculation that the HRTC will be extended to February 2011, however, there are no confirmed reports from the Government of Canada that the HRTC will actually be extended.
Both the GST/HST New Housing Rebate and the HRTC have encouraged a substantial increase in home renovation products and have already re-stimulated market demand for HVAC equipment.
By Marta Varisco and Lindsay Renaud