As building oversupply in Canada remains a cause for concern among some real estate watchers and big banks, the CMHC is suggesting that housing starts will be tempered in the next two years.
According to the Q1 2014 Housing Outlook report, the gradual increase in mortgage rates as well as a slow down in demand among first-time buyers will keep construction in check.
On an annual basis, housing starts are expected to range between 176,600 and 199,800 units in 2014, with a point forecast of 187,300 units, relatively unchanged from 187,923 units in 2013. In 2015, housing starts are expected to range from 163,200 to 206,600 units, with a point forecast of 184,900 units.
“With a relatively high number of units currently under construction, we expect builders will gradually adjust their activity in order to reduce their level of inventory,” said Mathieu Laberge, Deputy Chief Economist for CMHC, in the news release.
“Housing demand for resale market homes will continue to be sustained despite expected modest and gradual increases in mortgage rates toward the end of the forecast horizon.”
MLS sales are expected to range between 436,000 and 497,000 units in 2014, with a point forecast of 466,500 units, up from 457,485 in 2013. In 2015, sales are expected to range from 443,400 to 506,000 units, with an increase in the point forecast to 474,700 units.
The average MLS price is forecast to be between $380,100 and $400,700 in 2014 and between $384,300 and $409,900 in 2015. CMHC’s point forecast for the average MLS price calls for a 2.1 per cent gain to $390,400 in 2014 and a further 1.7 per cent gain to $397,100 in 2015.
The average price for a Canadian home is also expected to rise at a rate near inflation, reaching $390,400 and $397,100 in 2015, with increases of 2.1 per cent and 1.7 per cent, respectively.
The CMHC predicts starts will moderate in seven of the provinces while Alberta, British Columbia and Quebec are expected to see gains in 2014.
In 2015, housing starts are expected to pick up steam in Manitoba and Quebec while British Columbia is expected to see starts flatten. The remaining provinces should see starts moderate.
For more details, check out the tables below…