CMHC Forecasts That Canada’s Housing Market Will Slow In 2019 and 2020

Irving Hamilton
November 8, 2018

In its 2018 housing market outlook released today, the national housing agency projects housing starts and sales are both expected to decline in 2019 and 2020.

According to the Canada Mortgage and Housing Corporation, the country's real estate market will likely moderate over the next two years.

CMHC is still touting it as good news for renters because they'd be paying more even if the new supply of housing wasn't built. The trend suggests more modest pricing is on the horizon.

But while renter are getting more to choose from, the average price for those suites is not coming down. Buyers' market conditions are expected to slowly subside and this will help stabilize housing prices in 2019. It said, "Rising mortgage rates since May 2017 and stricter borrowing requirements are also having an impact on potential home buyers through two channels; 1) rising rates increase the carrying cost of holding a mortgage and; 2) rising rates have an impact on borrowing capacity".

Rising mortgage rates are also expected to affect housing demand and the resale market.

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For the resale market, the agency is forecasting MLS sales this year of between 51,600 to 56,000 compared with 57,211 in 2017. Sales are then expect to slide further in 2019 to between 6,200 and 6,600, and then recover slightly in 2020 to the 6,300-6,700 range. Full-time employment has still not returned to the level reached back in 2015.

CMHC expects MLS resales across drop from 103,759 units in 2017 to between 76,600 and 83,400 sales this year. However, in suburban areas, like Peel, Durham and York Regions, there will be higher concentrations of single-family detached sales and listings, and that will slow price appreciation.

Vacancy rates are expected to dip through 2020, but competition from the secondary rental market will keep vacancy rates from declining faster, the report said. CMHC forecast range is: $387,100 to $390,500 this year; $390,000 to $393,700 in 2019; and $394,000 to $398,600 in 2020. "Market conditions are not expected to substantially lift the average MLS price in 2020 and price growth will continue to be relatively flat". The range is expected to rise in 2019 to between 52,700 and 57,300 and in 2020 to be between 53,600 and 58,400. But as builders continue to work on new high-rises vacancy rates might also rise. "As such, the average rent will increase, in part, as the lower end of the price distribution catches up to current market prices".

The October vacancy rate hit 10.3 per cent in 2016.

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