Booming 2014 to give way to moderated 2014 and 2015?

by Justin da Rosa13 Aug 2014
CMHC forecasts gradually improving economic conditions in Canada in 2014 and 2015; though it also predicts a moderation in housing starts, according to its latest quarterly Housing Market Outlook report, released Wednesday.

The crown corporation outlined four contributing factors that it believes will contribute to a moderation in starts.
“First, total completed and unabsorbed units have continued on an upward trend since the early 2000s, driven by growth in the multi-unit segment,” CMHC’s report states. “In the first quarter of 2014, the inventory of completed and unabsorbed dwellings per 10,000 population remained at 4.8 units, slightly above the historical average of 4.3 units.”

Because of these factors, builders are expected to manage their inventory by slowing the pace of starts.

The second factor, according to CMHC, will be demographic trends – including slowed population growth in the 25-34 year old group – which are expected to squeeze the pool of first-time buyers.

As always, especially in major markets, increased housing prices are also forecasted to further hinder a number of potential buyers, as record high prices force many Canadians to put off their homeownership plans.

Finally, a forecasted rate spike in the latter half of 2015 is expected to decrease the demand to buy.

“Taking all these factors into consideration, housing starts are expected to moderate in 2014 to 184,800 units and remain at a comparable level of 183,100 units in 2015,” the report states. “To reflect potential risks to the outlook, CMHC produces range forecasts.”

For 2014, the crown corporation forecasts 179,600 to 189,900 units; 2015 is expected to see 163,000 to 203,200 units.
 

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