18 Feb Canadian housing starts expected to stabilize this year and next
OTTAWA – Canada’s national housing agency says the pace of new-home construction will stabilize in 2011 and 2012 after trending lower at the end of last year.
Canada Mortgage and Housing Corp.’s predicts between 157,000 and 192,000 new housing units will be built this year, with the number remaining virtually the same in 2012. In its first quarter housing market outlook, released Thursday, it said economic growth and lower unemployment will prop up the need for new homes.
“This, in conjunction with relatively low mortgage rates, will continue to support demand for new homes. Housing starts will remain in line with long-term demographic fundamentals over the course of 2011 and 2012,” Bob Dugan, chief economist for CMHC said in a statement.
Dugan said listing prices are expected to keep pace with increases in inflation.
The corporation said sales of existing homes should be in the range of 398,000 and 485,000 this year. In its January figures, CMHC said Canada was on track to build 170,400 units of housing this year, about 10 per cent less than in 2010.
The Canadian housing market was unusually active in late 2009 and early 2010 due to a catch-up from the recessionary levels in late 2008 and early 2009, preparations for the 2010 Winter Olympics and historically low interest rates that kept the cost of borrowing low.
A powerful driver of economic recovery, the real estate market kicked off last year on a tear as buyers rushed into the market in advance of higher interest rates, new mortgage rules and a new harmonized tax regime in two provinces.
The Bank of Canada began raising its key interest rate last summer, after keeping it at the lowest possible 0.25 per cent for more than a year in an effort to stimulate economic activity.
The central bank’s key rate has risen to one per cent — still below the historical norm — but has been stable since October.
But at least three of the major banks increased several of their posted and special mortgage rates last week, and the federal finance minister says he expects them to rise even more, since lending rates have been hovering close to historic lows.
Some reports have warned that when interest rates rise, which many economists expect in the middle of this year, Canada’s real estate market could tank.
The Canadian Press
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