CMHC issues forecast for next two years

Resale market to see lower sales, higher inventories around Metro Vancouver: CMHC

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

Nearly two years after the last recession, housing market conditions in Alberta continued to favour the buyer, creating downward pressure on housing prices, says a new report released on Tuesday by Canada Mortgage and Housing Corp. In 2020, the demand for more affordable housing options is expected to be even stronger. The trend suggests more modest pricing is on the horizon.

"Overall, we anticipate MLS® sales to trough in 2018 and see some recovery in 2019-20 while MLS® average prices will see a relatively flat growth profile with some risk of decline as demand and supply find a new balance".

The CMHC warns that if interest rates or unemployment rates also rise, heavily indebted households may curb spending leading to downward pressure on the economy and housing activity.

CMHC expects MLS resales to drop from 8,464 units in 2017 to 6,500-7,500 sales this year. The agency is forecasting the average Greater Victoria MLS home sale price to be between $693,900 and $703,300 this year (up from 2017's $652,928). 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. Sales are then expect to increase somewhat in 2019 to between 79,100 and 87,900 units, and then in 2020 to range between 81,500 and 92,500 sales. "Meanwhile, average rents for goal built apartments are anticipated to continue to see increases stronger than inflation in both 2019 and 2020". Full-time employment has still not returned to the level reached back in 2015.

"MLS sales in Alberta are projected to be lower in 2018 compared to 2017".

Rental market conditions are also expected to loosen as a result of slower growth in demand coupled with the increased inventory that is going to enter the market.

The report said the vacancy rate in Alberta expected to gradually decline over the forecast period, with the exception of oil-sands-driven economies such as Wood Buffalo and Cold Lake, where vacancy rates are expected to remain elevated. But as builders continue to work on new high-rises vacancy rates might also rise.

However, this market is expected to remain tight across Metro Vancouver, as rents continue increasing faster than inflation, on average.

When the region's vacancy rate started to fall from 1.5 per cent in 2014, it pushed local governments to start new construction on rental housing.

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