OTTAWA, August 15, 2008 — New home construction will begin to slow in 2008, but will remain high by historical standards, according to Canada Mortgage and Housing Corporation's (CMHC) third quarter Housing Market Outlook, Canada Edition report.
Higher mortgage carrying costs will be a catalyst for the decrease in residential construction to 215,475 units in 2008, from 228,343 in 2007. As a result, seven of the 10 provinces will register a lower number of housing starts in 2008 than in 2007.
“Strong economic fundamentals such as continuing high employment levels, rising incomes and low mortgage rates will provide a solid foundation for healthy housing markets this year,” said Bob Dugan, Chief Economist for CMHC. “Increased competition from the existing home market, coupled with the elimination of the pent-up demand that built up during the 1990s, will exert downward pressure on housing starts, which will decline to 194,000 units in 2009 from 215,000 in 2008.”
Existing home sales, as measured by the Multiple Listing Service (MLS®)1, are expected to fall by 11.9 per cent in 2008 to 458,300 units. In 2009, the trend will continue with a decrease to 446,600 units (-2.6 per cent). Despite a slowdown of MLS® sales, demand remains strong by historical standards. For 2008 and 2009, MLS® price growth will remain above inflation. Prices will reach $317,450 (+3.3 per cent) in 2008 and $327,000 (+3.0 per cent) in 2009.
At the provincial level, despite British Columbia's growing population and job numbers, a well-supplied resale home market will lower new construction. Home starts will move back toward their long-term average by 2009. A tight labour market and robust income growth will partially offset the dampening effect of rising mortgage carrying costs on the demand for new and existing homes. As well, an increase in the number of existing homes for sale will offer more choice to home shoppers and reduce new home demand. Housing starts will decline to 35,800 units in 2008 and 31,500 in 2009 from 39,195 units in 2007. The average MLS® price in British Columbia will grow by 7.6 per cent in 2008 and 3.3 per cent in 2009.
As Canada's national housing agency, Canada Mortgage and Housing Corporation (CMHC) draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable homes — homes that will continue to create vibrant and healthy communities and cities across the country.
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