CMHC Sees Steady Housing Market Ahead
OTTAWA — Canada Mortgage and Housing Corp. is predicting the Canadian housing market will remain fairly stable this year and next, with little change from 2011 in prices, new home construction and sales of existing homes.
The national housing agency said Monday in its first-quarter 2012 report that the foreseen stability stems from an economy that appears set to expand at only a moderate pace over the next two years. The Bank of Canada's key overnight rate — which affects mortgages tied to prime rates — will likely remain low until mid-2013, which should also act to keep activity on an even keel.
“With the Canadian economy set to expand at a moderate pace and mortgage rates expected to remain low, activity levels in 2012 in both new home construction and sales of existing homes will stay close to levels seen in 2011,” CMHC deputy economist Mathieu Laberge said in a statement.
Low mortgage rates and high demand have driven housing prices sharply higher in large urban centres such as Toronto and Vancouver, leading many experts to warn that a housing bubble could burst when rates finally do rise.
Despite those warnings and alarms from top government officials that Canadians are taking on too much debt overall, the housing market has seen little change over the past few years, with price growth slowing but not retreating in most areas.
The CMHC says it expects the average house price in Canada to hit $368,900 for 2012, with a projected range between $330,000 and $410,000, according to data from the Canadian Real Estate Association's MLS service.
For 2013, that number rises to $379,000, with a range between $335,000 and $430,000.
“The moderate increases in the average MLS price are consistent with the balanced market conditions that occurred in 2011, and that are expected to continue in 2012 and 2013,” CMHC said.
Housing starts are expected to be around 190,000 units this year and 193,800 units in 2013, while existing home sales are expected at about 457,300 units in 2012 and moving a little higher to 468,200 units in 2013.
The CMHC predicted that housing starts will be in the range of 164,000 to 212,700 units in 2012, and between 168,900 to 219,300 units in 2013. Existing home sales are expected in a range from 406,000 to 504,500 units in 2012, rising to 417,600 to 517,400 units in 2013.
Western Canada is expected to see strong growth in new housing starts, with Alberta leading the way with a 13.2 per cent increase. However, the agency said it expects housing starts in Saskatchewan to contract by about 2.7 per cent in 2013.
In Eastern Canada, all provinces are expected to see a contraction in housing starts for 2012, with “modest growth” returning to Quebec and Ontario in 2013.
The agency noted that the fate of an economic recovery in the United States, Canada's largest single trading partner, could have an immediate affect on Canada's housing industry —
“Some upsides include the potential that the U.S. could recover more quickly than anticipated, which would be positive for U.S. employment and economic growth,” CMHC said.
“In turn, this could boost employment growth in Canada and thus lead to a stronger than expected housing market.”
Conversely, if the U.S. recovery hits a snag and emerging economies see their growth slow while Europe suffers a slowdown, that could lead to slower employment growth in Canada and place a chilling effect on the demand for housing.
The Canadian Press