Canadian housing market settles into soft landing
Canada's federal housing agency nudged up its forecast for housing starts and prices this year and said sales and construction will be steady to higher next year as an improving economy tempers the impact of rising mortgage rates.
The view from the Canada Mortgage and Housing Corp (CMHC) 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 housing starts will be in a range of 176,600 and 199,800 this year, with a point forecast, or most likely outcome, of 187,300 units, relatively unchanged from 187,923 units last year. 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 next year, 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 US neighbour.
Also, a post-recession housing boom helped it recover more quickly than its Group of Seven peers. But the housing market began to cool in the middle of 2012 after the country's Conservative government, worried about the potential for a property bubble, decided to tighten mortgage legislation.
Demand fuelled a strong rebound last year, and economists are largely predicting a softer but stable market this year.
The CMHC forecasts see homebuilding and sales levelling 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 last year.
For next year, 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 this year and next.