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HOUSING: CHMC predicts starts to fall slightly, average house price to rise 5.2% in 2008
        (AlbertaIndex, February 7, Thursday) --- Housing starts are expected to decline this year after edging up 0.4 percent to 228,343 units in 2007, said Canada Mortgage and Housing Corporation (CHMC).
        In its first quarter Housing Market Outlook report, CHMC said that residential construction will decline to about 211,700 units in 2008 as a result of higher mortgage carrying costs.

Nevertheless, it said Canada’s housing market remains strong and 2008 will mark the seventh consecutive year in which housing starts exceed 200,000 units.

“Despite some global financial instability with regards to the US housing market, Canada continues to experience robust employment levels, ongoing income gains and low mortgage rates,” said Bob Dugan, Chief Economist for CMHC.

“This has strongly supported Canada’s housing markets. However, housing starts are expected to decrease in 2008 mainly due to recent increases in house prices, which will push mortgage carrying costs higher for home buyers.”

Existing home sales, as measured by the Multiple Listing Service (MLS), are poised to experience a very strong year with about 520,000 units in 2007, a 7.6 per cent increase over 2006.

In 2008 the level of MLS sales is expected to fall by 3.9 per cent to 499,650 units, while 2009 will see an additional decrease to 488,300.

CHMC said growth in the average MLS price has remained high at 10.6 per cent in 2007, mainly because of continued strong price pressures in the western provinces.

However, as most resale markets move toward more balanced conditions, growth in average MLS price is forecast to slow to 5.2 per cent in 2008 and 3.8 per cent in 2009.

At the provincial level, British Columbia’s housing starts, which have been above historical averages, are expected to decline in 2008.

It is anticipated that a continuing tight labour market, robust income growth and high levels of consumer confidence will help to offset the dampening effect of rising mortgage carrying costs on the demand for new and existing homes in British Columbia.

CHMC said Alberta continues to experience very low unemployment and continuing prosperity. Despite these positives, the province is expected to face a drop in net migrants between now and the end of 2008 due to the growing difference in provincial house prices and improved labour market conditions in other provinces.

It said: “These factors will combine to reduce housing starts from 48,336 units in 2007 to 39,500 in 2008 and 37,750 in 2009. Following an unprecedented 30.7 per cent gain in 2006, and a forecasted strong 24.4 per cent rise in 2007, the average MLS price is expected to climb by 3.9 per cent in 2008 and 5.4 per cent in 2009.”

CHMC predicts the average MLS price in British Columbia will grow by 12.1 per cent in 2007, 6 per cent in 2008 and 5 per cent in 2009. This moderation is due to increased listings and fewer resales bringing more balanced supply and demand conditions to existing homes.

During 2007, Saskatchewan experienced steady economic growth, a healthy employment situation and gains in net migration. This contributed to strong housing demand.

The province’s housing starts reached 6,007 units in 2007, the highest level in 24 years. However, escalating costs will push housing starts down to 5,600 units in 2008 and 5,300 in 2009.

After surging by 31.7 per cent last year, the average MLS price in Saskatchewan is expected to rise by 26.4 per cent in 2008 and 8.2 per cent in 2009, said CHMC.

Manitoba is one of five provinces whose economic growth is expected to exceed the national average for 2007. This success has contributed to a five-year high in job creation, which has increased net migration to levels not seen since 1982.

These factors will contribute to healthy levels of new home construction through 2008. Total housing starts reached 5,738 units in 2007, the best performance in 20 years. Starts will edge up slightly to 5,800 units in 2008 and 5,900 in 2009.

The average MLS price in Manitoba will rise by 12.5 per cent in 2007, 9.8 per cent in 2008 and 5.7 per cent in 2009.


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