CMHC expects housing starts and sales to slide over next 2 years

Marco Green
November 8, 2018

The Canada Mortgage and Housing Corporation forecasts a balanced market in the GTA through 2020, with fewer sales expected because of rising interest rates.

CMHC says the national real estate market is expected to moderate over the next two years as the growth in housing prices is expected to slow to more in line with economic fundamentals.

The CMHC outlook says the average rent in Victoria is well below what new renters are paying and as older units turnover, rents will increase to reflect new price levels. "It is likely that condo prices will continue to rise, albeit at a slower pace, until more supply is introduced into the market over the next two years".

The report said existing home sales will experience a fourth-straight yearly decline in 2018, with stabilization and some growth in 2019.

"However, tighter borrowing conditions and rising mortgage rates will provide some headwinds", said the CMHC Housing Market Outlook.

Over the past two years, sales growth for higher-end single-detached homes has boosted price growth.

For the resale market, the agency is forecasting MLS sales this year of between 51,600 to 56,000 compared with 57,211 in 2017.

"However, the average MLS price will continue facing downwards pressure, but is expected to stabilize in 2019 and modestly rise in 2020". Full-time employment has still not returned to the level reached back in 2015. For 2019, sales are expected to rise slightly, coming in between 478,400 and 497,400 units. CMHC forecast range is: $387,100 to $390,500 this year; $390,000 to $393,700 in 2019; and $394,000 to $398,600 in 2020. Vacancy rates are forecast at 7.7 per cent for 2018, before declining to 7.0 and 6.5 per cent in 2019 and 2020 respectively.

CMHC expects MLS resales across B.C.to drop from 103,759 units in 2017 to between 76,600 and 83,400 sales this year.

"Through nine months of 2018, the average MLS price in Alberta was approximately $390,000, down 2.6 per cent from the same period in 2017".

Rental market conditions are also expected to loosen as a result of slower growth in demand coupled with the increased inventory that is going to enter the market.

"Net interprovincial migration is turning positive and these new households will help lower the vacancy rate in Alberta".

When the region's vacancy rate started to fall from 1.5 per cent in 2014, it pushed local governments to start new construction on rental housing.

Through this year, Vancouver has born witness to softening home prices across all market segments, and that trend is expected to continue, according to CMHC.

Other reports by Click Lancashire

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