Canada’s housing market hasn’t hit bottom yet, says CMHC

By
Millicent Wong
-
0
254
financial post

  1. property

Prices are expected to fall further by the middle of the year

Released April 27, 2023 • Last updated 1 hour ago • 2 minutes read

Canadian home prices will continue to fall through mid-2023, according to the latest housing market forecasts from Canada Mortgage and Housing Corporation. Canadian home prices will continue to fall through mid-2023, according to the latest housing market forecasts from Canada Mortgage and Housing Corporation. Photo by Jeff Haynes/Getty Images

Canadian home prices will continue to fall through mid-2023 before bottoming out and rising again into 2025, according to the latest housing market outlook from Canada Mortgage and Housing Corporation.

This ad has not yet loaded, but your article continues below.

THIS CONTENT IS FOR SUBSCRIBERS ONLY

Subscribe now to read the latest news in your city and across Canada.

  • Unlimited online access to articles from across Canada with one account.
  • Get exclusive access to the National Post ePaper, an electronic copy of the print edition that you can share, download, and comment on.
  • Enjoy behind-the-scenes insight and analysis from our award-winning journalists.
  • Support local journalists and the next generation of journalists.
  • Daily puzzles including the New York Times crossword.

SUBSCRIBE TO UNLOCK MORE ARTICLES

Subscribe now to read the latest news in your city and across Canada.

  • Unlimited online access to articles from across Canada with one account.
  • Get exclusive access to the National Post ePaper, an electronic copy of the print edition that you can share, download, and comment on.
  • Enjoy behind-the-scenes insight and analysis from our award-winning journalists.
  • Support local journalists and the next generation of journalists.
  • Daily puzzles including the New York Times crossword.

SIGN UP TO UNLOCK MORE ARTICLES

Create an account or log in to continue your reading experience.

  • Access items from across Canada with one account.
  • Share your thoughts and join the discussion in the comments.
  • Enjoy additional articles per month.
  • Receive email updates from your favorite authors.

The national housing agency’s annual forecast, released on April 27, predicts that while the average house price for 2023 will be below last year’s levels, a shortage of supply and rising demand will compound the country’s housing affordability challenges.

By clicking the subscribe button, you agree to receive the above newsletter from Postmedia Network Inc. You can unsubscribe at any time by clicking on the unsubscribe link at the bottom of our emails or any newsletter. Postmedia Network Inc | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300

The CMHC is forecasting a fall in housing starts due to higher construction and borrowing costs and projects new supply to remain below 2021 and 2022 levels before some recovery in 2024 and 2025.

“With demand for housing still significantly exceeding the supply of new housing, affordability challenges for owners and renters will remain,” said chief economist Bob Dugan.

Higher mortgage rates and still-elevated price levels will make home ownership less affordable even if prices have fallen, he said.

This ad has not yet loaded, but your article continues below.

In an interview, Dugan said the housing authority forecast that the Bank of Canada would keep interest rates stable for the rest of the year and gradually lower them in 2024. The central bank left its interest rate unchanged at 4.5 percent on April 12.

“What has been done so far in terms of rate hikes will slow the economy enough to get rid of excess demand and we will see inflation gradually move lower,” he said.

Once the central bank finally starts cutting interest rates next year, stable and declining interest rates will lead to an improvement in housing demand and a gradual increase in home sales, even though supply in the market is very tight, Dugan added.

This ad has not yet loaded, but your article continues below.

A lack of affordability will persist despite a slowdown in inflation and a gradual fall in mortgage rates, both of which are expected to support demand for housing, he said.

As a result, many households will be forced to remain in the rental market, which is already facing significant supply shortages, particularly in Toronto, Vancouver and Montreal, the CMHC said.

It also said the big falls in housing starts will be more severe in 2023 Ontario, British Columbia and Quebeccompared to other regions.

“This is where we see the biggest challenges in terms of housing starts over the next year or so,” Dugan said. “So what worries us is that it’s moving in the wrong direction to restore affordability.”

  1. The CMHC said the seasonally adjusted annual rate of housing starts fell to 213,865 units in March from 240,927 units in February.

    Higher interest rates hit housing construction

  2. The ban on overseas homebuyers has been amended to ease some restrictions on purchases.

    Ottawa amends ‘illogical’ ban on overseas homebuyers

  3. none

    Canadians flocked to adjustable rate mortgages ahead of rate hikes

This ad has not yet loaded, but your article continues below.

He said the CMHC expects about two million launches to be built by 2030, while Canada needs another three and a half million launches to actually restore housing affordability.

“I’m less optimistic because the environment for housing starts is pretty challenging right now,” Dugan said, explaining that construction health is being impacted by high interest rates, labor shortages and high material costs.

On demand, he said Canada has bottomed out and will see stabilization in housing demand and prices in the second quarter, with demand growth picking up from there thanks to stabilizing interest rates.

• Email: [email protected] | Twitter: denisepglnwn

Comments

Postmedia strives to maintain a lively but civilized discussion forum and encourages all readers to share their opinions on our articles. Comments may take up to an hour to be moderated before they appear on the site. We ask that you keep your comments relevant and respectful. We’ve turned on email notifications – you’ll now receive an email when you get a reply to your comment, there’s an update on a comment thread you follow, or when a user you follow comments follows. For more information and details on how to customize your email settings, see our Community Guidelines.

Join the conversation