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CMHC Market Outlook
 April 21 2015     Posted by Tracy Bennett

CMHC released its latest quarterly Housing Market Outlook last week. It contains nothing which could be interpreted as particularly dramatic in terms of its forecast for the next year or two – and that’s probably a good thing for the housing market overall.

The forecast for housing starts through 2014 is for continued stability. After reaching a level just short of 215,000 housing starts in 2012, this year has seen a reduction in new starts which CMHC forecasts will total 185,000 by the end of the year. Starts in 2014 are forecast to be slightly lower at 184,700. Western Canada, where economic conditions are stronger, is expected to see a larger percentage of new starts than other regions will. Single-detached starts, which have accounted for a shrinking portion of total starts over the past 15 years, are expected to be more stable than multi-family starts which will likely decline in relation to their high levels of the past couple of years.

Some markets such as Toronto have been the subject of some concern among some analysts due to a growing supply of completed but unoccupied homes, particularly in the multi-family sector. CMHC points out that current average number of unabsorbed multi-family units per 10,000 people in Canada is 3.05. In the first quarter of this year, the ratio was 3.16. The historical average for this ratio is 2.43. For single-detached units, the same ratio stands at 2.04 against a historical average of 2.14.

For resales, CMHC sees quite a stable market for the remainder of 2013 before trending upward in the first half of next year. For 2013, the CMHC forecast total for resales is 456,700 and this is projected to reflect an improving economic climate in 2014 by rising to 468,200. As mortgage rates have risen in recent months and are expected to rise further (although based on the current trend for government bond yields, this sentiment may change), CMHC suggests that buyers will likely continue to move their purchases forward early in 2014 – as they have been doing in recent months. In 2012, resales totalled 454,005.

Resale prices are projected to rise this year by about 4% and CMHC explains this forecast by suggesting that there will likely be increased sales in Canada’s more expensive markets like Vancouver and Toronto. The average MLS price in Canada by the end of 2013 is expected to be $378,000. For 2014, home prices will increase by about the rate of inflation - 1.9% - and the average MLS price will reach $385,200.

Although most markets in Canada are currently in what is considered to be balanced territory, September was the sixth consecutive month which saw sales growth increase more than new listings. This is tightening market conditions toward and ever so slightly into seller’s territory as the sale-to-new-listings ratio reached 56.1 in September – up from 54.8 the previous month. Some analysts consider the threshold between balanced markets and seller’s markets to be a 55% sales-to-new-listings ratio.

CMHC explains the macro-economic trends impacting housing as follows: Canadian Gross Domestic Product (GDP) is expected to rise by 1.7% this year and by 2.3% in 2014. This growth in the economy is considered to be supportive of housing demand. Employment is projected to grow by 1.4% this year and in 2014. Increased employment and moderate growth in income and rates of household formation are all supportive of the housing industry. Immigration, which is expected to reach 269,000 in Canada in 2013 (against a longer term average of 238,500) will also be supportive of new household formation and the market as a whole. Mortgage rates, even if they continue to rise somewhat, will remain low by historical averages and will continue to make home financing affordable.

Full report: cmhc-schl.gc.ca/catalog/productDetail.cfm?cat=129&itm=1&lang=en&fr=1383944461444

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