Housing starts are forecast to remain steady in 2011 and 2012, according to Canada Mortgage and Housing Corporation's (CMHC) Third Quarter Housing Market Outlook report.
"Housing starts have been strong in the last few months, but are forecast to moderate closer in line with demographic fundamentals," said Mathieu Laberge, deputy chief economist for CMHC. "Despite recent financial uncertainty, factors such as employment, immigration and mortgage rates remain supportive of the Canadian housing sector."
The agency predicts housing starts will be in the range of 166,300 to 197,200 units in 2011, with a point forecast of 183,200 units. In 2012, housing starts will be in the range of 161,700 to 207,200 units, with a point forecast of 183,900 units. Housing starts were 189,930 units in 2010.
Existing home sales will be in the range of 425,000 to 472,500 units in 2011, with a point forecast of 446,700 units, essentially the same as the 446,485 sales in 2010. In 2012, MLS sales are expected to increase modestly in the range of 407,500 to 510,000 units, with a point forecast of 458,000 units.
Since existing home sales peaked in the first quarter of 2011, new listings have outpaced existing home sales. As a consequence, the resale market has moved slightly from a sellers' to a balanced market, which would normally put downward pressure on prices. However, relatively more expensive homes were sold during this period causing the average MLS price to increase in Q2 of 2011.
The average MLS price increased in the first half of 2011 partly as a result of more higher-end homes sold during that period. For the remainder of 2011, the average MLS price is expected to moderate. Nevertheless, the annual average MLS price is forecast to increase in 2011 to $367,500. As the existing home market becomes even more balanced, 2012 will see a modest increase in the average MLS price to $272,400.
The CMHC sees housing starts moderating in all areas of Canada in 2011, with the exception of Ontario and Saskatchewan which will experience a modest increase in housing starts. In 2012, growth in housing starts is expected to be the strongest in Alberta and B.C. while Manitoba will experience modest growth.
The number of single-detached housing starts is expected to reach 81,600 in 2011, down from 92,554 in 2010. Single starts will increase to 84,900 units in 2012. The construction of single-detached homes will decrease in all provinces in 2011, with the exception of Saskatchewan. The outlook for 2012 is more positive in B.C. and Alberta which will experience strong growth, with Quebec and Manitoba experiencing modest increases in single starts. The decrease in 2012 in most other provinces will be more muted than the decrease in 2011.
Following some strong growth from mid-2009 to mid-2010, multi-family housing starts (row, semi-detached and apartment units) is expected to increase modestly in 2011 to about 101,600 starts in 2011 and about 99,000 units in 2012. Across the country, Ontario and B.C. will experience strong growth in the number of multi-family housing starts in 2011 with more modest gains in Nova Scotia, Saskatchewan and Newfoundland and Labrador. In 2012, only Alberta is expected to see a strong growth in multiple housing starts.
Total net migration (immigration minus emigration) stood at 244,644 in 2010. Over the next two years, net migration is expected to increase due to an improving economic environment and better employment opportunities. In 2011, net migration is forecast to increase to 245,900 while 2012 will see an increase to 263,250. These increases will stimulate demand for housing, particularly rental housing.