Canada Housing Market to Cool Off, Finally
Canada Relocation - nupad.ca
Canada Mortgage and Housing Corp. Primarily because a lot of pent-up
demand has already been met and carrying costs are rising.
In its first-quarter housing market outlook, the CMHC projects that
housing starts will moderate slightly this year. Even the sizzling
Alberta market is expected to cool off a bit.
"Although Alberta's vibrant job market will continue to be a magnet
for workers from other parts of Canada, escalating house prices both
in the new and resale markets will slow housing demand for the next
two years," according to CMHC projections.
Nationally, existing home sales - as measured by the Multiple Listing
Service - remained near record levels in 2006, reported CMHC, which
projects that existing home sales will ease to 464,550 units in 2007
and to 449,200 units in 2008.
"Similarly, after five years of strong growth in house prices, the
rate of increase in the average [resale] price will moderate to 5.9
per cent in 2007 and 3.3 per cent in 2008 as existing home markets
move toward balanced conditions.
"The strongest price growth will be in Western Canada; with the
average MLS(R) price in Alberta growing by 13.3 per cent in 2007 -
after having increased by 29.5 per cent in 2006. Average MLS(R) prices
in Ontario and Quebec will grow by 3.2 per cent and 4.1 per cent in
2007, respectively," according to the outlook.
The national vacancy rate is expected to remain essentially unchanged,
edging up to 2.7 per cent in both 2007 and 2008. Renters will have the
toughest time in Calgary, where strong rental demand will keep the
Calgary vacancy rate low, at 0.6 per cent in 2007 and 1.0 per cent in
2008.
However, the apartment vacancy rate in Montreal will rise to 3.2 per
cent in 2007 and 3.5 per cent in 2008 as the growing home ownership
trend continues to affect the largest rental market in Canada, the
CMHC said.
Commenting on the projections for new housing starts, CMHC chief
economist Bob Dugan said that, although residential construction will
decline, housing starts will remain high by historical standards. He
said 2007 will mark the sixth consecutive year in which housing starts
exceed 200,000 units. New construction will likely ease to 195,500
units in 2008, he said.
"Construction activity will continue to moderate as demand for home
ownership moves toward more sustainable levels," Mr. Dugan said.
"Most of the pent-up demand that built up during the 1990s has been
absorbed, and higher mortgage carrying costs due to continued strong
price growth and modest increases in mortgage rates will contribute to
the slower pace of new home construction both this year and next."
Here are the CMHC's housing-start projections, by province:
British Columbia: Housing starts will decline to 34,700 units in 2007
and 32,300 units in 2008. This compares with 36,443 units in 2006.
High levels of consumer confidence, employment and income growth will
sustain demand. "However, as the resale market moves toward balanced
conditions, there will be less spill-over of demand into the new home
market."
Alberta: Total housing starts are expected to decline to 45,500 units
in 2007 and 42,500 in 2008 - down from 48,962 units in 2006.
Escalating house prices and higher carrying costs are dampening
demand.
Saskatchewan: Housing starts are expected to ease to 3,600 units in
both 2007 and 2008 - a slight drop from the 3,718 starts in 2006. A
strong job market, robust income growth and improving net migration
from other parts of the country will keep demand for new homes at
relatively high levels.
Manitoba: Housing starts are projected to decline to 4,900 units in
2007 and 4,750 units in 2008 from the 2006 level of 5,028. A healthy
employment picture, and a successful provincial program to attract new
immigrants, "will continue to support healthy levels of new home
construction."
Ontario: Slower growth in net migration, rising new home prices and
increased choice in the resale market - combined with land constraints
- will weaken housing starts. New-home construction will decline to
67,000 units in 2007 and 62,570 in 2008. This is down from 73,417
units in 2006.
Quebec: Economic and demographic growth will remain moderate and the
pent-up demand that accumulated during the 1990s is now exhausted.
Housing starts will drop to 42,650 units in 2007 and to 38,925 units
in 2008. This compares with 47,877 in 2006.
New Brunswick: Housing starts will drop to 3,700 in 2007 and 3,600 in
2008 - down from 4,085 in 2006. Gains in the provincial energy sector
will be partially offset by a weak outlook for the manufacturing and
lumber industries. Continued migration to western Canada, as well as
limited economic expansion, will slow employment growth.
Nova Scotia: Housing starts are expected to decline to 4,650 units in
2007 and to 4,400 units in 2008 - down from 4,896 in 2006. Although
employment growth is weak, demand will be propped up by low mortgage
rates, elevated consumer confidence and gains in household income.
Prince Edward Island: Housing starts will decline to 675 units in 2007
and 650 units in 2008 - from 738 units in 2006. The provincial economy
is expected to growth at a moderate rate over the next couple of
years.
Newfoundland: Housing starts will ease to 2,125 units in 2007 and
2,050 in 2008. This is down from 2,234 in 2006. Ongoing population
losses and low employment growth will contribute to the decline.
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