Housing starts will moderate this year to 209,500 units after reaching 227,395 units in 2006, according to a report relased today by Canada Mortgage and Housing Corp.

Although residential construction will decline, 2007 will mark the sixth consecutive year in which housing starts exceed 200,000 units, CMHC said. Starts will ease further to 195,500 units in 2008.

“Construction activity will continue to moderate as demand for home ownership moves toward more sustainable levels,” said Bob Dugan, chief economist at CMHC, in a news release. “Most of the pent-up demand that built up during the 1990s has been absorbed, and higher mortgage carrying costs due to continued strong price growth and modest increases in mortgage rates will contribute to the slower pace of new home construction both this year and next.”

Existing home sales, as measured by the Multiple Listing Service (MLS), remained near record levels in 2006. Sales will ease to 464,550 units in 2007 and to 449,200 units in 2008. Similarly, after five years of strong growth in house prices, the rate of increase in the average MLS price will moderate to 5.9% in 2007 and 3.3% in 2008 as existing home markets move toward balanced conditions.

The strongest price growth will be in Western Canada; with the average MLS price in Alberta growing by 13.3% in 2007 – after having increased by 29.5% in 2006. Average MLS prices in Ontario and Quebec will grow by 3.2% and 4.1% in 2007, respectively.


At the provincial level, new home construction in British Columbia will trend lower but remain high by historical standards.

Although Alberta’s vibrant job market will continue to be a magnet for workers from other parts of Canada, escalating house prices both in the new and resale markets will slow housing demand for the next two years.

In Saskatchewan, the improving net migration as well as the strong job market and robust income growth bode well for housing demand.

In Manitoba, strong non-residential construction activity, a healthy employment picture, and the successful Provincial Nominee Program which is attracting international immigrants will continue to support healthy levels of new home construction.

In Ontario, slower growth in net migration, rising new home prices and increased choice in the resale market combined with land constraints will weaken housing starts from 73,417 units in 2006 to 67,000 units in 2007 and to 62,750 units in 2008.

In Quebec, economic and demographic growth will remain moderate and the pent-up demand that accumulated during the 1990s is now exhausted.

In New Brunswick, gains in the provincial energy sector will be partially offset by a weak outlook for the manufacturing and lumber industries.

In Nova Scotia, despite weak employment growth, economic conditions remain generally supportive of housing demand with low mortgage rates, elevated consumer confidence and gains in household income.

Prince Edward Island’s economy is expected to grow at a moderate rate over the two coming years and employment growth will slow to well under 1%.

An acceleration of GDP growth to 5.0% in Newfoundland will not prevent a decline in housing starts from 2,234 units in 2006 to 2,125 units in 2007.