'Soft landing' expected for housing market, CMHC says

Written By Unknown on Rabu, 13 Agustus 2014 | 22.39

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Canada Mortgage and Housing Corporation expects house prices to increase, while home construction is expected to slow slightly. (Mike Cassese/Reuters)

Canada's national housing agency says it expects builders to stop making as many new homes and focus on selling the ones they've already built.

The Canada Mortgage and Housing Corporation's latest quarterly forecast predicts lower sales volumes for 2015, with 163,000 to 203,200 homes expected to be built. The lower end of that forecast is below the 179,600 to 189,900 new homes expected by the end of this year.

The low end of that range is itself a slowdown from 2013, when 187,923 new Canadian homes were built.

Add it all up, and the housing agency calls for a "soft landing" in housing — a term used by economists to describe a housing market that slowly cools down without ever experiencing a jarring, sudden large drop in prices, sales or new builds.

"Recent trends have shown an increase in housing starts, which is broadly supported by demographic fundamentals. However, our latest forecast calls for starts to edge lower as builders are expected to reduce inventories instead of focusing on new construction," CMHC economist Bob Dugan said.

While construction is expected to slow slightly, prices are expected to rise.

CMHC's point forecast for homes predicts a 4.5 per cent gain to $399,800 in 2014 and another increase of 1.8 per cent gain to $406,800 next year.

Just as prices are expected to inch higher, so too does the agency expect sales volumes to tick up.

CMHC expects approximately 463,600 Canadian homes to be sold this year, and 474,300 units next year. Both figures are slightly above the 457,338 homes sold last year.


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