Total Canadian housing sales expected to remain stable in 2014 as homebuilders limit housing starts while unabsorbed inventories fall, existing-home sales rise slightly on improving economic conditions: CMHC Housing Outlook Conference
November 28, 2013
– Canada Mortgage and Housing Corporation (CMHC) presented its annual Housing Outlook Conference today to about 800 industry professionals. Under the theme "Beacons to guide you," the speakers analyzed the state of the real estate market in the country, the province and the Montréal census metropolitan area (CMA) and also spoke about what will shape tomorrow's market.
CMHC expects total housing starts to be stable in 2014, as fundamentals, such as employment growth and migration, continue to support the Canadian housing market.
On the new home market, builders are nevertheless expected to limit the number of housing starts, while inventories of unabsorbed units, completed and under construction, are drawn down. On the resale market, homebuyers have been motivated to advance their purchases and lock in pre-qualified mortgages, given the recent moderate increase in mortgage rates. It is expected that existing home sales will increase modestly in 2014, with improving economic conditions.
In Quebec, the rather slow economic and employment growth recently will lower demand on the existing and new home markets this year. "The decline in activity on the resale market and the relatively large inventories of new homes will cause housing starts to fall considerably in 2013," said Kevin Hughes, CMHC's Senior Economist for Quebec. That being said, the demographic trends will support housing demand until 2014. At that time, activity on both the existing and new home markets will pick up thanks to a stronger economy and a tighter resale market.
In 2013, single-detached home starts will be weakened by the current economic environment and the easing of the resale market. Such starts will record a decrease of 17.2 per cent. Meanwhile, starts of multiple-unit housing units, which are in an absorption phase, will register a drop of 24.3 per cent. In 2014, starts of single-detached homes and multi-unit housing will remain relatively stable (13,200 and 23,500 units, respectively). Single-detached houses should stop losing market shares, while the condominium segment will still be in its absorption phase.
In 2013, transactions on the resale market will decrease by 5.5 per cent. Next year, when conditions will be more conducive to homebuying, resales will start rising again. An increase of 2.6 per cent is forecast for 2014. There has been less pressure on prices in the last few quarters, as demand for existing homes has decreased and supply has increased. This should continue throughout 2014. With the market more balanced, the growth in prices on the resale market will keep weakening in 2013. The average Centris® price will reach $268,000 this year and then move closer to $270,000 in 2014.
Regional outlook - Montréal CMA
In 2014, starts will increase slightly in the Montréal CMA but will remain at low levels compared to earlier years. In all, foundations will be laid for 16,300 new dwellings, for an increase of 1 per cent over 2013. However, condominium starts will continue to fall on account of the relatively large numbers of unsold new and existing units.
On the resale market, 40,000 transactions will be registered in 2014, for a gain of 7 per cent over 2013. The increase in the number of resales will be the result of improved economic conditions and the activity inherent in an increase in the housing stock. Market conditions should stay balanced, and the pressure on prices will again be weak (+0.5 per cent). In the case of condominiums, the easing of the market will lead to a small decrease in the average price.
According to the latest data from the Statistics Canada National Household Survey, nearly half of the condominium buyers in the Montréal CMA in 2011 were single-person households. The median income of condominium buyers was in fact lower (25 per cent) than that of buyers of houses (1). Households aged from 25 to 34 effectively made up the largest group of condominium buyers in the CMA in 2011, despite their much more limited demographic weight. In the previous censuses, it was rather the dominant demographic group, that is, households aged from 35 to 54, who held that top spot.
Also, according to two different data sources (2), the percentage of investors on the Montréal CMA condominium market remained limited in 2012, hovering between 10 and 15 per cent. However, this proportion has been slightly on the rise for the past few years. As well, the percentage of condominiums that are purchased and resold quickly (within one year) remained low and stable in 2012, at about 3 per cent.
Montréal and its suburbs: diversified trends
Island of Montréal
Condominium buyers are young-one in two is under 35 years old-and half of them are single-person households. The condominium resale market is now favourable to buyers in almost all market zones on the Island of Montréal. The average price of condominiums is bound to stabilize or even decrease in certain zones on the Island in 2014.
On the new home market, the inventory of unabsorbed condominiums should increase further in 2014, which will prompt builders to reduce the level of starts.
Among the households who buy houses or plexes in the suburbs, up to one in four comes from the Island. Nearly one in three condominium buyers is over 55 years old, a higher proportion than on the Island.The existing single-family home segment will stay balanced in 2014 and see prices rise slightly in all sectors. As for existing condominiums, CMHC forecasts that this segment will remain favourable to buyers in 2014 and post a small increase in the average price, as well.
On the new home market, freehold housing starts are shifting toward the outskirts and even outside of the CMA territory. And, given the large number of condominiums available on the new and existing home markets, CMHC expects that condominium starts will decrease in all suburban sectors in 2014.
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(1) More specifically, buyers of houses and plexes.
(2) The data sources are the CMHC Secondary Rental Market Survey and the condominium property assessment rolls obtained from the Ministère des Affaires municipales, des Régions et de l'Occupation du territoire.