CMHC predicts slowdown in housing market

Published on August 14, 2012

Canada Mortgage and Housing Corp. (CMHC) is forecasting a moderate slowdown in new home construction starts, as well as sales of existing housing during the remainder of this year and into 2013.

The federal agency isn’t calling for a major decline, but its latest forecast suggests next year will be somewhat softer than estimates it issued in June, while 2012 may be somewhat stronger than previously expected.

CMHC has been saying for some time that it expects housing prices in most local markets will grow more slowly than they have been recently.

The CMHC says housing starts and home sales have been strong in 2012 — particularly when it comes to multiple-dwelling units such as condos and apartments — but will soften moderately in coming months into 2013.

In St. John's, the CMHC predicts growth in population, income and employment will support the local housing market for the remainder of this year and into 2013. Housing prices and the current inventory of new and existing units are expected to cause housing activity to moderate over the forecast period.

The agency says a solid economic outlook for the St. John's area is expected to contribute to a relatively stable housing market for 2012 and 2013. However the St. John's resale market is expected to post lower sales activity this year and next year.

The CMHC is forecasting multiple listing service (MLS) sales in the St. John's area of about 3,500 units this year, compared to 3,647 sales in 2011, with a further decline expected in 2013 to 3,300 sales.

But, with new home sales representing 28 per cent of total MLS sales in 2011, solid residential construction activity is  expected to continue to add support to total MLS sales over the forecast period.

On a provincial level, the CMHC says current growth indicators for Newfoundland and Labrador include solid full-time employment gains and positive growth in consumer spending activity, including auto sales for the remainder of this year.

These trends, along with income growth of more than seven per cent in 2011, are expected to support the overall outlook for 2012. The CMHC says energy and mining project development, as well as mining production, will remain key supporters of growth.

The agency says a decline seen in the rate of growth in 2012 from 2011 is related to a temporary drop in oil production as a result of oil platform refitting and a move by the province to balance the budget in the current fiscal year. The moderate rebound in 2013 is related to further increases in energy and mining related spending activity. The province is expected to have 1.5 per cent GDP growth in 2012 and 1.8 per cent in 2013.

In its Atlantic overview, the CMHC says total housing starts declined by more than four per cent in the first quarter of 2012, as a result of a 7.9 per cent drop in multiple starts. Single starts were down less than one per cent in the first quarter. Total housing starts in Newfoundland and Labrador were up three per cent.

The high Canadian dollar and higher energy costs are expected to continue to impact manufacturing in Atlantic Canada for the remainder of this year, with the exception of Nova Scotia where a recent shipbuilding contract announcement for Halifax will help offset some of the expected weakness.

The CMHC says overall GDP growth for the region will remain below two per cent in 2012 and 2013 as a result of weaker employment growth and refocusing of spending and investment activity by both the public and private sector.

Nationally, the CMHC's deputy chief economist Mathieu Laberge said, "Balanced market conditions in most local housing markets will result in a slowing in house price growth as well.”

In the latest national forecast, CMHC estimates there will be between 196,800 and 217,000 units of housing started in 2012, with a point forecast of 207,200 units.

The point forecast is slightly higher than an estimate of 202,700 issued by CMHC in June, when the range was wider at between 182,300 to 220,600.

In 2013, CMHC now estimates housing starts will be in the range of 173,000 to 207,400 units, with a point forecast of 193,100 units — about seven per cent fewer than this year under the latest forecast.

The previous 2013 point forecast for 195,700 housing starts.

Based on data compiled by the Canadian Real Estate Association, CMHC said Tuesday that it expects about 466,600 units of existing housing to be sold this year and 469,600 units in 2013.

The average price for property sales through CREA members is forecast to be between $351,300 and $378,400 in 2012 and between $358,000 and $395,800 in 2013, CMHC said Tuesday.

CMHC’s point forecast for the average price is now $368,000 for 2012 and $377,300 for 2013, the agency said Tuesday Its June was the average price to be $372,700 for 2012 and $383,600 for 2013.