CMHC forecasts 'moderation' in Canadian housing market over next two years

CMHC hmo van prices graph nov 2018

"Meanwhile, average rents for objective built apartments are anticipated to continue to see increases stronger than inflation in both 2019 and 2020".

"On a year-to-date basis, MLS sales have decreased 13.5 per cent from September 2017".

Their annual report, which was released on Tuesday, suggested housing starts and sales will decline in 2019 and 2020.

"As much as sales are going to come down slightly, we'll see house price growth be more or less in line with inflation, not the double-digit kind we were accustomed to a few months ago", said CMHC's Manager of Market Analysis (Toronto) Dana Senagama.

Home values are forecast to rebound in both 2019 and 2020, said the report, but a key risk to price recovery would be a decline in employment, income, or population growth. After peaking in 2016, sales dropped in 2017 and are still moderating. Sales are then expect to increase somewhat in 2019 to between 79,100 and 87,900 units, and then in 2020 to range between 81,500 and 92,500 sales. While economic growth has generated employment gains, full-time employment in Alberta is still recovering from the last oil price shock. Full-time employment has still not returned to the level reached back in 2015. On the other hand, demand will be moderated by rising mortgage rates. "It is likely that condo prices will continue to rise, albeit at a slower pace, until more supply is introduced into the market over the next two years". "Over the next two years, MLS sales in Alberta are expected to be relatively stable and only gradually rise", said the CMHC.

The agency is forecasting the average B.C. MLS home sale price to be between $683K and $749K this year (2017 average sale price was $709,597).

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Rental market conditions are also expected to loosen as a result of slower growth in demand coupled with the increased inventory that is going to enter the market.

Vacancy rates are expected to dip through 2020, but competition from the secondary rental market will keep vacancy rates from declining faster, the report said. But as builders continue to work on new high-rises vacancy rates might also rise.

The provincial vacancy rate which was 6.7 per cent in 2017 is expected to fall to 5.9 per cent this year, to 5.1 per cent in 2019 and to 4.9 per cent in 2020.

Through this year, Vancouver has born witness to softening home prices across all market segments, and that trend is expected to continue, according to CMHC.

Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.

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