In its annual housing market outlook, Canada Mortgage and Housing Corp. (CMHC) said that it expects the country's real estate market to cool and for increases in house prices to moderate over the coming two years.
CMHC, the national housing agency based in Ottawa, forecasts that both housing starts and sales will decline in 2019 and 2020. It predicts that housing starts for single and multi-unit starts will fall to between 193,700 and 204,500 in 2019, while sales are anticipated to be between 478,400 and 497,400 units. Average house prices are anticipated to range between $501,400 and $521,600 across the country.
"Our key takeaway from this year's outlook is moderation in Canada's housing markets for 2019 into 2020," said Bob Dugan, Chief Economist at CMHC, in a news release.
CMHC added that it expects the number of single-detached housing starts to decrease due to a number of factors, including the availability of lot sizes, housing prices and higher borrowing costs. Multi-unit starts were also expected to decline, partly attributable to smaller anticipated growth in the 25-34 age group which makes up a large proportion of first-time home buyers.
The agency also expects demand will continue to shift toward relatively less expensive housing options like apartment condominiums versus higher-end single-detached homes. CMHC said that it still sees global trade as a "risk" to Canada’s economy and the housing market.
Rising mortgage rates are also expected to affect housing demand and the resale market over the coming years. In the outlook, CMHC also warned that Canadian households remain vulnerable due to heavy debt loads.
"If interest rates or unemployment rates were to rise more than expected, heavily indebted households could face greater constraints on their consumption leading to downward pressure on the economy and housing activity," said CMHC in its news release.
