Canadian Housing Market Expected to Moderate

Canadian housing market should moderate during the next two years while the housing prices slow down and fall in line with economic fundamentals, according to Canada Mortgage and Housing Corporation.

Housing starts and sales rates will respectively dwindle come 2019 and 2020, claims the national housing agency in its annual outlook.

Single and multi-unit housing starts are expected to drop between 193,700 and 204,500 in 2019. There are also an anticipated 478,400 to 497,400 sales, selling at $501,400 to $521,600

According to Bob Dug, chief economist at the CMHC, is that Canadian housing market is going to moderate. Furthermore, he explained that prices should fall in line with income, job, population growth, and other economic fundamentals.

Single-detached housing starts will become more infrequent because of the lack of availability of lot sizes, housing prices, and hiked borrowing costs, believes the agency.

Similarly projected to decrease, multi-unit starts will suffer from less-than predicted growth in the 25-34-years-old demographic. This age group makes up a large % of first-time buyers. However, the ageing populations aiming to downsize could neutralize the downward trend.

Inexpensive housing options such as apartment condominiums will be more in demand in lieu of higher-end homes.

Even with the recent trade agreement between Canada, the U.S., and Mexico, global trade is still a huge risk to Canada’s economy and the housing market.

Housing demands and the resale marketing will also be drastically altered by skyrocketing mortgage rates.

After the requisite moderation occurs, the CMHC projects a slight rise in housing prices. The report dictates that the desire for existing homes by 2020 will be quelled via a halt in employment, stifled GDP growth, and continually rising mortgage rates. In the face of less demand compared to the levels of new supply, the market will ease.

Still, heavy debt loads with keep Canadian households in a precarious state. The CMHC explains that unemployment rates and interest rates increasing more than expected could lead to indebted households being unable to spend and a hindering on the economy and housing activity.