Canada’s federal housing division, CMHC, has revised their predictions for new residential housing starts for 2015. CMHC anticipates that the rate of new home development to steadily decelerate in the foreseeable future.
Even though the Canada Mortgage and Housing Corp said on February 6th., it anticipates employment and disposable income to continue to support the country’s robust housing market, it noted the downside risks have increased since its October forecast due to the fact of the decline in oil prices. They stated that low oil prices will detrimentally impact certain economic regions like Alberta, Saskatchewan, and Newfoundland and Labrador. This will only be partially balanced out by the favorable impact of reduced exchange and mortgage interest rates.
Housing starts are expected to range between 154,000 and 201,000 units this year, with a point forecast, or most likely outcome, of 187,400 units, the CMHC stated. This is somewhat reduced from the projection it offered in October, stating a range of 172,800 to 204,000 units, and a point forecast of 189,500. According to its base case scenario, new housing starts will drop by 1% in comparison to 2014. In 2016, the CMHC anticipates a range of 148,000 units to 203,000 units, with a point forecast of 185,100, which is not much of a change.
Canada averted most of the global economic turmoil and has experienced and accelerated housing market helped by continuing lower interest rates on mortgages. Many economists are still expect the Canadian housing market to see a softer landing, even though the sudden slide in the price of crude oil has brought up some anxiety about Canada’s financial future moving forward, since oil is a leading export.
Lastly the CMHC is forecasting average home prices to improve by 1.5 percent in comparison to last year.
See full press Release below or read it on CMHC’s site by clicking HERE:
OTTAWA, ONTARIO–(Marketwired – Feb. 6, 2015) – According to CMHC’s first quarter 2015 Housing Market Outlook, Canada Edition, housing starts in 2015 will remain similar to levels observed in 2014 and broadly in line with economic and demographic trends. By 2016, slight moderation is expected.
“Our market outlook calls for gradual moderation in the pace of new home construction over the next couple of years as employment, disposable income and high net migration continue to support the market,” said Bob Dugan, Chief Economist for CMHC.
“However, downside risks have increased since the previous forecast due mainly to recent declines in oil prices. Lower oil prices will negatively affect oil-producing economies like Alberta, Saskatchewan, and Newfoundland and Labrador, which will only be partly offset by the positive effects of lower exchange rates and interest rates across all provinces. We have widened the forecast ranges for housing starts, MLS® sales and average MLS® prices to reflect these risks.”
Under CMHC’s base case scenario, housing starts are expected to decline by 1.0 per cent in 2015 relative to 2014; Multiple Listing Service®(MLS®2) sales are expected to remain unchanged, and the MLS® average price is expected to increase modestly by 1.5 per cent.
On an annual basis, housing starts are expected to range between 154,000 and 201,000 units in 2015, with a point forecast of 187,400 units. For 2016, housing starts are forecast to range from 148,000 units to 203,000 units, with a point forecast of 185,100 units.
MLS® sales are expected to range between 425,000 and 504,000 units in 2015, with a point forecast of 479,900 units. In 2016, resales are forecast to range from 410,000 units to 505,000 units, with a point forecast of 474,400 units.
The average MLS® price is forecast to be between $384,000 and $428,000 in 2015, with a point forecast of $414,200. For 2016, the average MLS® price is forecast to be between $388,000 and $438,000, with a point forecast of $420,900.
As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need, and offers objective housing research and information to Canadian governments, consumers and the housing industry.
Follow CMHC on Twitter @CMHC_ca.
1 The forecasts included in the Housing Market Outlook reflect information available as at January 21, 2015. Where applicable, forecast ranges are also presented in order to reflect financial and economic risks to the outlook.
2The Multiple Listing Service® (MLS®) is a registered trademark owned by the Canadian Real Estate Association.