OTTAWA - Canadian housing construction starts are expected to stabilize in coming years, following an even stronger rebound in 2010 than previously forecast, according to a new CMHC outlook issued Wednesday.
Canada Mortgage and Housing Corp. is now estimating there will be between 166,900 and 199,600 units started this year.
That's about 18,000 to 50,000 more units than the 149,081 started in 2009 and also higher than CMHC's previous forecast in March, when it estimated 152,000 to 189,300 starts for 2010.
CMHC's revised mid-point estimate for this year is 182,000 housing starts and that will moderate to 179,600 units in 2011, the federal Crown corporation said.
Chief economist Bob Dugan said housing starts will become more in line with long-term demographic fundamentals and the home resale market will move towards "balanced conditions" over the next two years.
The housing market is considered to be "balanced" when the number of buyers and sellers is roughly equal. The market early this year was marked by an influx of buyers and a relative shortage of properties for sale, resulting in bidding wars in some markets and a sharp increase in sale prices nationally.
Among the factors driving buyers to the market were low mortgage rates, which have begun to rise, and changes in sales taxes that go into effect this year in Ontario and British Columbia.
Some buyers were also eager act before in federal rules that increased the amount of downpayments required for investment properties that took effect last month.
"New measures for government-backed mortgage insurance introduced by the government of Canada that took effect on April 19, will continue to support the long-term stability of Canada's housing market," Dugan said in a news release.
The Canadian residential real-estate market experienced the sharpest downturn in at least a decade from late 2008 to early 2009 as a result of a recession, rising unemployment and lack of consumer confidence.
In the latter half of 2009, however, sales volumes ramped up and prices recovered in many major market as buyers returned to take advantage of more moderate prices, historically low interest rates and an improved economy.
Some of the sales since mid-2009 are the result of pent-up demand, Dugan said.
"Once this demand is exhausted, and as mortgage rates gradually rise, the pace of activity in the resale market will ease," he added.
CMHC expects between 484,000 and 513,300 existing homes will be sold this year, with a mid-point forecast of 497,300 units. Sales should then slip in 2011 to between 443,500 and 504,900 units, or a midpoint of 473,500 units. That's down 4.8 per cent from the midpoint forecast for 2010.
The rebalance should allow prices to stabilize through the end of 2010 and then increase modestly in 2011.
