Steady housing market in 2015, some moderation in 2016: Canada's housing agency

OTTAWA -- Home construction in Canada will stay steady in 2015 as it follows the country's economic and demographic trends, the national housing agency said Thursday.

Looking beyond next year, however, the Canada Mortgage and Housing Corp. is predicting "some moderation" for 2016.

"Economic conditions in Canada are forecast to gradually improve in the short-term and lead to modest increases in employment and average earnings, which should support housing demand," the agency said in its latest housing market outlook.

"However, the positive effect of improving economic conditions on new construction activity will be offset by a number of factors."

Some of those expected causes include: a slowdown in the pace of construction, the shrinking poll of young, first-time buyers due to slower population growth, rising housing prices in some markets and the anticipated interest-rate increase in late 2015.

The agency predicts housing starts to come in at 189,000 units for 2014, followed by 189,500 in 2015, before moving downward to 187,100 in 2016.

Housing starts have increased in recent months, especially for multi-unit structures, CMHC chief economist Bob Dugan said Thursday in a statement.

"This has been broadly supported by key factors such as employment, disposable income and net migration, which are expected to continue to be supportive of the Canadian housing market over the 2014-2016 forecast horizon," Dugan said.

Looking at the resale market, the CMHC expects brightening economic conditions to deliver a moderate boost in Multiple Listings Service sales in 2014, up to 476,100 units. It projects the momentum to continue in 2015 when home sales are expected to reach 482,500.

In 2016, however, the agency predicts the resale market to cool off and drop to 477,200 units sold due to the expected decrease in first-time buyers.

Nationally, the CMHC said the average MLS price in 2014 is expected to increase 5.8 per cent to $404,800, rise by another 1.4 per cent in 2015 to $410,600 and then move up again by 1.6 per cent to $417,300 in 2016.

"Further analysis of the resale market reveals relatively balanced market conditions, with modest growth in sales expected in the short-term and moderation over the medium term," the report said.