VANCOUVER —
A report from the Canada Mortgage and Housing Corporation forecasts lower housing starts, sales and prices for the country’s major markets – and a slower rebound in Vancouver than in some other cities.
The latest outlook, released Tuesday morning, looks at the impacts of the COVID-19 pandemic so far, and estimates when things may return to normal. Scroll down to read through the full report, including information on other markets.
Housing starts
Senior analysts Braden Batch and Eric Bond wrote that housing starts in B.C.’s most populous city are expected to “contract significantly in the immediate future.”
While B.C.’s approach to the novel coronavirus pandemic has allowed for construction, new builds will be challenged by reduced migration from Canada and aboard, the Vancouver market forecast says.
Additional factors impacting housing starts are increased unemployment and uncertainty regarding long-term economic impacts of COVID-19.
Prior to the pandemic, the report says, the construction industry had been operating at or near capacity. Still, the CMHC said, there was a decline in construction activity even before the pandemic.
The corporation expects things to pick up again toward the end of the year.
Sales and price recovery
CMHC expects a contraction of the resale market, but forecasts a recovery period starting next year.
Resale activity was “largely suspended” early on in the pandemic, and listings declined at that time as well.
Sales had slowed down in 2018-19, but were starting to pick up again before the pandemic. COVID-19 is expected to delay the recovery, the CMHC report says.
And those who are looking to sell may be getting less for their homes for the time being.
“A price decline will occur, but it will take place more gradually over the next two years before showing some recovery in late 2022,” the report says.
The CMHC report forecasts average house prices declining due to residents’ reduced incomes.
There’s been an uneven impact on buyers of condos and detached houses, the corporaration says, so there’s “additional uncertainty for the path of the average price decline.”
While most markets are expected to see homes selling for less, CMHC says prices may return to normal earlier in Toronto, Montreal and Ottawa. Vancouver, Edmonton and Calgary should expect a slower rise back to pre-pandemic prices, it says.
Rental demand
While owners may be worried about the impact of the pandemic, those in the rental market have been more directly impacted so far.
CMHC says the rise in unemployment and sudden, lengthy border closures are hitting the more sensitive rental market harder.
Buyers tend to be older than renters, and less likely to have lost their jobs, the report says.
Last week, B.C. Finance Minister Carole James said those most impacted have been the province’s lowest earners: young people and women.
Women are 25 per cent more likely to have lost their job than men, and the youth unemployment rate reached 29 per cent, according to the latest data.
Young people are less likely to have accumulated enough savings to buy in Vancouver, and the rental market is “largely driven by the influx of young migrants,” the report says. Many of these migrants are immigrants to Canada.
The border closure was expected to have a direct impact on the demand for rentals.
The report includes information on other major Canadian markets. Read through the full 18 pages below.
The Canada Mortgage and Housing Corp. says construction of new homes in Canada’s six largest cities rose four per cent year-over-year during the first half of 2024, but housing starts were still not enough to meet growing demand.
The agency says growth in housing starts was driven by significant gains in Calgary, Edmonton and Montreal.
A total of 68,639 units began construction, the second strongest figure since 1990, however the rate of housing starts per capita meant activity was around the historical average and not enough “to reduce the existing supply gap and improve affordability for Canadians.”
The report says new home construction trends varied significantly across the markets studied, as Toronto, Vancouver and Ottawa saw declines ranging from 10 to 20 per cent from the same period last year.
Apartment starts in the six regions increased slightly, driven by construction of new units for rent, as nearly half of the apartments started in the first half of 2024 were purpose-built rentals.
But condominium apartment starts fell in the first six months of the year in most cities, a trend which the agency predicts will continue amid soft demand as developers struggle to reach minimum pre-construction sales required.
This report by The Canadian Press was first published Sept. 26, 2024.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
