Housing starts reached 228,343 units in 2007, an increase of 0.4% from 227,395 in 2006, according to Canada Mortgage and Housing Corporation’s (CMHC) first quarter Housing Market Outlook.
In 2008, residential construction will decline to about 211,700 units, given higher mortgage carrying costs. Nevertheless, Canada’s housing market remains strong and 2008 will mark the seventh consecutive year in which housing starts exceed 200,000 units, CMHC says.
“Despite some global financial instability with regards to the U.S. housing market, Canada continues to experience robust employment levels, ongoing income gains and low mortgage rates,” says Bob Dugan, chief economist for CMHC. “This has strongly supported Canada’s housing markets. However, housing starts are expected to decrease in 2008 mainly due to recent increases in house prices, which will push mortgage carrying costs higher for home buyers.”
Existing home sales, as measured by the Multiple Listing Service (MLS), are poised to experience a very strong year with about 520,000 units in 2007, a 7.6% increase over 2006. In 2008 the level of MLS sales is expected to fall by 3.9% to 499,650 units, while 2009 will see an additional decrease to 488,300. Growth in the average MLS price has remained high at 10.6% in 2007, mainly because of continued strong price pressures in Canada’s western provinces. However, as most resale markets move toward more balanced conditions, growth in average MLS price is forecast to slow to 5.2% in 2008 and 3.8% in 2009.
At the provincial level, British Columbia’s housing starts, which have been above historical averages, are expected to decline in 2008.
Alberta continues to experience very low unemployment and continuing overall prosperity. Despite these positives, the province is expected to face a drop in net migrants between now and the end of 2008 due to the growing difference in provincial house prices and improved labour market conditions in other provinces.
During 2007, Saskatchewan experienced steady economic growth, a healthy employment situation and gains in net migration. This contributed to strong housing demand.
Manitoba is one of five provinces whose economic growth is expected to exceed the national average for 2007. This success has contributed to a five-year high in job creation, which has increased net migration to levels not seen since 1982. These factors will contribute to healthy levels of new home construction through 2008.
The Ontario economy is expected to improve slightly during 2008 and this will help sustain housing demand across the province. New home construction activity will be moderate between now and the end of 2008.
Solid job creation and steady economic growth in Quebec during 2007 pushed housing starts up by 1.4% to 48,553 units. A moderation of the economy will cause a slight shift downwards in 2008 to 46,500 units and 45,375 in 2009.
In New Brunswick, rising mortgage carrying costs, a slower economy and more choice in the resale market will result in lower levels of new home construction.
Nova Scotia will experience slower employment and population growth during 2008, causing new home construction activity to be more restrained.
Prince Edward Island’s economy is expected to undergo modest economic growth through 2008. As a result, housing starts will slowly decline from 750 units in 2007 to 700 in 2008 and 675 in 2009.
In Newfoundland, a strong export-driven economy has pushed housing demand up. However, it is expected that higher homeownership and construction costs and lower employment growth will dampen housing demand in 2008.
Housing starts to dip in 2008: CMHC
Increases in house prices will push mortgage carrying costs higher for home buyers
- By: IE Staff
- February 4, 2008 February 4, 2008
- 09:10