Originally seen in
The Globe and Mail
The housing market may be a boring place for the next year, according to CMHC, as the number of starts remains near current levels and resale prices hold steady.
In its fourth quarter market update, Canada Mortgage and Housing Corp. said mortgage rates would likely remain at historically low levels at least until the last half of 2012. The housing market’s fate is largely tied to rates, the agency said.
Economists and market watchers have predicted a variety of scenarios for house prices in the next year, with some suggesting prices could drop as much as 10 per cent by the end of 2012. Capital Economics goes a step further, having predicted a drop of 25 per cent in the next several years as demand weakens amid higher mortgage rates.
“Should rates move lower than projected, housing starts and MLS sales could be higher than expected and house prices could grow at a faster pace than forecast,” the report stated. “Alternatively, should financial market expectations improve and interest rates move higher than projected, housing starts and MLS sales could be lower than expected and house prices could grow at a slower pace than forecast.”
CMHC said there could be as many as 470,100 resales in Canada this year, and expects that number to rise to 485,500 in 2012.
“We expect balanced market conditions to prevail and the average MLS price to remain fairly flat to the end of 2012,” the report stated.
CMHC said 186,750 new homes would be built in 2012, compared to 191,000 for 2011. Analysts generally agree that at least 175,000 new homes are needed each year to meet demand from new families and immigration.
“Ontario, Saskatchewan and Nova Scotia’s growth will be the strongest, while Prince Edward Island and British Columbia are forecast to see modest growth,” CMHC said. “The other provinces, on the other hand, are expected to see decreases. In 2012, housing starts are forecast to increase in British Columbia, Alberta and Manitoba.”
Other highlights from the report:
· Posted mortgage rates will remain relatively flat until late 2012. For 2012, the one-year posted mortgage rate is expected to be in the 3.4 to 3.8 per cent range, while the five-year posted mortgage rate is forecast to be within 5.2 to 5.7 per cent.
· Single starts have rebounded coming out of the recession. After an increase in the third quarter of this year, they are expected to moderate before rising later in 2012.
· Since the beginning of 2011, new listings steadily outpaced existing home sales. As a consequence, the resale market has moved from sellers’ to balanced market conditions.
The agency said the economic outlook for the country was uncertain, making it difficult to forecast growth in the housing market.
“Sustained financial market uncertainty has heightened risks but, there are both upside and downside risks to the outlook,” the agency stated.
The positive: “Some upsides include the potential that the U.S. could recover stronger than is forecast, thus increasing U.S. employment and economic growth. This could, in turn, boost employment growth in Canada and lead to stronger than anticipated housing demand.”
The negative: “Some downsides include a slower than expected recovery for the U.S., reduced economic growth in emerging economies and a downturn in parts of Europe. Such events could result in slower employment growth in Canada, which could lead to lower demand for housing.”
Ben Sage, Sales Representative. Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON
www.facebook.com/SageAdviceRealEstate www.bensage.com www.oxfordcountyhomes.ca
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