The Canada Mortgage and Housing Corp. (CMHC) reports that this year’s upturn in house prices will slowly wear off over the next two years. CHMC forecasts that end 2015 will see national home prices 7.2 per cent higher. However, this rate of increase is not expected to continue.
Canadian home prices will continue to rise. Yet, the rate of the climb will be slower. CMHC predicts a 1.3 per cent rate for 2016 and a 1.4 per cent rate for 2017.
In addition, new home construction will also begin decreasing. This year saw 186,990 housing starts. The coming year will see almost 9000 fewer (178,150) with new construction even lower in 2017 (173,650).
Some say that this will mean a glut of unsold condos. They think that in such a situation, builders will try to satisfy customer demand for new housing with already built units.
With a nod to regional housing markets, CMHC predicts the following for 2016-2017:
Atlantic Canada: Residential starts expected to fall. Price rises of Halifax homes to be lower than the rate of inflation. Home buyers in St. John’s benefit from 2 per cent fall in prices.
Calgary: At year end, detached home construction will be at 1988 levels and home sales will fall by almost 30 percent with a downward turn to resale home prices – a 2.1 per cent fall this year with barely a 1 per cent rise in 2016. Multifamily starts in 2016 will decrease about 43 per cent in comparison with 2014 highs.
Edmonton: There were about 10,000 starts – primarily condos and rentals. However, 2016 will see a downturn to only 5,500 starts. Home resales should decline by 12 per cent this year, recovering in 2016 and 2017.
Montreal: New home buyers will cause home prices to increase by 2 per cent each year. Rental vacancy rates will also rise due to oversupply of newly constructed rental accommodations.
Quebec City: A surplus of homes, both new and existing, will cause housing starts to be reduced. Resale home prices are expected to be up by 1 per cent in 2016 and 1.5 per cent the following year.
Saskatchewan: End 2015 figures show that overall detached house construction plummeted 30 per cent this year with multifamily residence starts reduced by 34 per cent. On average, home prices are expected to be lower by about 0.7 per cent, increasing modestly in 2016 and 2017.
Toronto: The trend towards multifamily residences rather than one-family detached homes will cause 5 per cent fewer housing starts in 2016, with even 10 per cent fewer in 2017. High house prices will mean fewer first-time buyers. This year’s figure of 100,000 home sales will fall to 87,500 by 2017.
Vancouver: Only a slight cooling during 2016 and 2017 with housing starts remaining high. Each year should see the construction of 20,000 units. End 2015 will see home resales soaring to decade highs (up by 9 per cent), tapering off in the coming two years.
Windsor and London, Ont.: Housing starts in both cities are expected to rise by 6 per cent next year due to house purchases by millennials.