Canada upgrades housing forecasts

PUBLISHED : Wednesday, 05 November, 2014, 6:25am
UPDATED : Wednesday, 05 November, 2014, 6:25am

Canada's federal housing agency predicts work on new homes will increase this year and next, compared with an August call for a decline, in another sign of unexpected strength in the real estate market.

Work would begin on 189,500 units in 2015, up from 189,000 this year, which would be an increase from 2013 levels, Canada Mortgage & Housing Corp said in a quarterly forecast. In August, the agency predicted starts would fall this year and next from 2013.

Bank of Canada senior deputy governor Carolyn Wilkins said that although elevated household debt remained a risk, real estate in Canada was probably headed for a "soft landing".

In September, the central bank said the housing market had advanced faster than policymakers anticipated, and it dropped a reference to the constructive evolution of real estate.

Mortgage rates at historical lows are fuelling a resurgence in the housing market, including for condominiums in Toronto and Vancouver. The mortgage agency forecast in August that starts would drop to 184,800 this year and further to 183,100 next year, from 187,923 in 2013.

"The trend for housing starts has been up in recent months, particularly in multi-unit structures," the agency's chief economist Bob Dugan said. "This has been broadly supported by key factors such as employment, disposable income and net migration, which are expected to continue to be supportive of the market over the 2014-16 horizon."

Starts would fall in 2016 to 187,100 units as "builders focus on reducing their inventories", Dugan said.

While some parts of the market were overvalued, in general Canadian housing was robust, the agency's chief executive Evan Siddall said.