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The Canada Mortgage and Housing Corporation (CMHC) is forecasting a “gradual slowdown” in the country’s housing market as oil prices slump. According to the second quarter Housing Outlook released Monday, buyers will also seek out more moderately priced homes in 2015 and 2016, keeping the average sale price in check.
“Due to the recent decline in oil prices, our assessment is that there is more downside risk than upside risk to our forecast,” the corporation wrote in the outlook.
The average price for a home sold through the MLS system is forecast to fall between $402,139 and $439,589 in 2015, with a point forecast of $422,129. Looking ahead to 2016, the average MLS price is expected to range between $398,191 and $457,200, with a point forecast of $428,325.
Canada-wide, home sales via the MLS system are believed to range between 437,100 and 494,500 units for 2015, with a point forecast of 475,400 units. In 2016, sales are to expected to range from 424,500 units to 491,300 units, with a point forecast of 469,000 units.
“Lower oil prices are contributing to disparities between provincial housing markets. A slowdown in housing starts and resale transactions in oil-producing provinces such as Alberta will be partly offset by increased housing market activity in other provinces, such as Ontario and British Columbia, which benefit from the positive impacts of declining energy prices, a lower Canadian dollar and continued low mortgage rates,” said Bob Dugan, Chief Economist for CMHC, in the news release.
Starts and sales are both expected to drop in Alberta and Saskatchewan due to weakening demand, though Manitoba will remain stable thanks to stronger employment growth and net migration. MLS homes sales in Alberta are expected to measure between 52,000 and 60,500 in 2015 and between 52,700 and 61,500 in 2016. The forecast represents a marked decline from the 71,773 sales seen in 2014.
Sales prices for existing homes in Alberta will also record a decline. In 2014, the province’s average MLS price was $400,590, but as parts of Alberta shift towards a buyer’s market, the average is anticipated to fall between $366,600 and $402,000 in 2015 and $360,400 and $409,500 in 2016.
As for Saskatchewan, there were 13,868 resales in 2014, an amount that’s expected to decline to between 11,300 and 13,100 in 2015 and 11,400 and 13,300 in 2016. The CMHC notes that “supply levels are elevated relative to demand in Saskatchewan.” Last year, the average resale price was $298,359, an amount that is expected to fall between $282,000 and $304,500 in 2015 and $279,000 and $315,400 in 2016.
In Ontario, all eyes are on the GTA housing market, which continues to see strong sale and price growth (the GTA recently broke the monthly record for existing home sales in April and the average sale price shot up to $635,932, a 10 per cent increase over April 2014).
Demand for existing homes in the GTA is expected to remain strong. The CMHC is also forecasting stronger interest in higher density dwellings and conversely, an uptick in home rentals over ownership.
“An improving economy will be more supportive of the Ontario housing market in 2015 than it has been in the recent past,” said Ted Tsiakopoulos, CMHC’s Ontario Regional Economist.
“However, as mortgage carrying costs continue to grow, particularly for single family homes, demand will increasingly shift to more affordable housing.”
As for British Columbia, continued growth in employment and population will keep the market stable.
Sales will range from 82,300 to 93,100 transactions in 2015 and between 78,700 to 91,800 transactions in 2016. In terms of pricing, the average for a home sold via MLS is expected to fall between $573,700 and $627,500 in 2015, before moving up to the range of $577,000 and $652,000 in 2016.
Canada-wide, residential construction will also wind down since the inventory of completed and unabsorbed units remains “above the historical average.” The corporation believes 2015 and 2016 will see moderation in housing starts. In 2015, on an annual basis, starts are expect to range between 166,540 and 188,580 units with a point forecast of 181,618 units. Heading into 2016, housing starts are anticipated to range from 162,840 units to 190,830 units, with a point forecast of 181,800 units.