By Andrea Hopkins, Reuters, February 6, 2014 - TORONTO - Canada’s federal housing agency nudged up its forecast for housing starts and prices in 2014 and said sales and construction will be steady to higher in 2015 as an improving economy tempers the impact of rising mortgage rates. The view from the Canada Mortgage and Housing Corp suggests the nation’s once-roaring housing market is settling into a soft landing, with construction moderating to more sustainable levels and sales and prices ticking slowly higher.
The CMHC said on Thursday housing starts will be in a range of 176,600 and 199,800 in 2014, with a point forecast, or most likely outcome, of 187,300 units, relatively unchanged from 187,923 units in 2013. That is up slightly from CMHC’s October estimate of 184,700 starts.
The agency said there will be 163,200 to 206,600 units started in 2015, with a point forecast of 184,900.
Both forecasts represent a sharp slowdown from the 214,827 starts of 2012, when the market was at record highs and the government intervened to tighten mortgage lending rules.
Canada sidestepped the worst of the financial crisis of the last decade because it avoided the real estate excesses of its U.S. neighbor, and a post-recession housing boom helped it recover more quickly than its Group of Seven peers.
But the housing market began to cool in mid-2012 after the country’s Conservative government, worried about a potential property bubble, tightened mortgage rules. Demand fueled a strong rebound in 2013, and economists are largely predicting a softer but stable market this year.
The CMHC forecasts see homebuilding and sales leveling off, with prices continuing to notch small gains.
CMHC said existing home sales will range from 436,000 to 497,000 in 2014, with a point forecast of 466,500 units. That’s down slightly from October’s forecast of 468,200 but up from 457,485 in 2013.
For 2015, it expects a move up to a range of 443,400 to 506,000, with an increase in the point forecast to 474,700.
Price gains are expected to slow in 2014 and 2015. CMHC’s point forecast for the average price calls for a 2.1% gain to $390,400 in 2014, and a 1.7% gain to $397,100 in 2015.
© Thomson Reuters 2014