Canada's Condominium Magazine
The pace of new homebuilding in Canada will pick up later this year and even more so next year, says the country’s national housing agency, Canada Mortgage and Housing Corporation. Total housing starts for the year 2013 will be lower in all provinces than in 2012, but CMHC predicts that they will trend “slightly higher” by next year. While housing activity will vary across the country, with some regions seeing declines and others growth, the overall outlook is for slow and steady growth.
Resale housing markets across the country have already begun to rebound following the slowdown that occurred mid-2012; so far this year, sales, listings and prices have all been on the upswing. This trend, which is a reversal of the downward trend that marked the last quarter of 2012, is expected to lead to a similar trend in the new home market, which typically lags the resale market by one to three quarters.
In Ontario, housing activity will slow in 2013 compared to 2012, but will stabilize by 2014 as the economy improves. CMHC’s Ontario regional economist sees a number of factors, including improving affordability, a decrease in out-migration, improving income growth, and a tight resale market for low density housing, having a positive impact on the demand for single detached homes. Existing home sales have already stabilized, and will rise higher in 2014.
Looking at Toronto and the GTA, the forecast is for new home starts to “edge back” to 33,400 units in 2013. The decrease compared to 2012 is the result of the condominium segment’s “pulling back” from the record levels reached last year, CMHC says. Condominium construction will still make up the bulk of residential construction in the GTA. Low-rise home starts will push the total number of new housing starts higher by 4 per cent in 2014. Pre-construction sales next year, both high-rise and low-rise, will improve gradually, with an expected total of 89,500 units. This will “align well” with the average for the past five years.
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Factors affecting the housing market*
Mortgage rates: no increase in short-term and variable mortgage rates anticipated before mid-2014 .Mortgage rates are expected to remain low by historical standards and therefore support housing demand.
Employment: expected to improve during the course of the year and forecast to grow 1.3 per cent in both 2013 and 2014, which will support the housing sector.
Income: growth in incomes is expected to continue at a moderate pace, on account of modest economic growth in Canada and global markets. As a result, income growth will remain supportive of housing demand.
Net migration: Canada should continue to attract a high level of immigrants, based on an anticipated continuation of its relatively strong economic performance. This will support housing demand in the medium to long term.
Population: lower growth among the 25-34 year age group is expected to lead to a slight moderation in demand from first-time home buyers this year and over the longer term. Furthermore, Canada’s low birth rate should lessen the demand for additional housing stock in the medium and longer term. Population aging, however, will also impact the type and tenure of housing demanded.
Resale market: conditions are expected to be balanced in most local markets for this year and next, with the average home price expected to grow at or slightly below the rate of inflation. The average monthly growth rate of sales, new listings and prices in the resale market will eventually be reflected in the new home market .
Vacancy rates: rental vacancies across Canada are expected to decline slightly, to 2.5 per cent, in 2013 and remain at that level in 2014.
Stock of new and unoccupied housing: unabsorbed inventory has been stable in the first quarter of 2013, indicating continued strength in demand for newly completed homes. In addition, the ratio of the stock of unabsorbed new units to population, is close to the historical average.
*Adapted from CMHC Housing Market Outlook [/box]