The Canadian media has offered a less than rosy outlook on the Canadian housing market for some time now, with warnings of a major burst of the housing bubble. The recent 2016 Housing Market Outlook from the CMHC actually paints a more moderate prediction.
Some media reports have characterized the CMHC outlook with predictions that 2016 may mark the end of Canada’s real estate boom. The Financial Post, while careful to note that we will not see a massive correction, called the report a “dim forecast” stating we can expect to see “dismal price growth.”
The CMHC report, which was published in late October 2015, points to the economic impact of lower oil prices in some provinces, with Alberta experiencing the largest impact. The report also notes that Ontario has a slightly different reality, fueled by an economy that stands to benefit from lower oil prices and a lower Canadian dollar.
“In 2015, increased housing market activity in provinces like Ontario and British Columbia – provinces that have benefitted from declining energy prices, a lower Canadian dollar and continued low mortgage rates – offset slowdowns in oil-producing provinces like Alberta,” said Bob Dugan, CMHC Chief Economist. “We expect, however, that this counterbalancing effect will decrease over time. As such, housing starts and MLS® sales are projected to moderate in 2016 and 2017.”
While the report points to a moderate effect on the housing market, it is not calling for a collapse. Key highlights from the report include:
- For 2016, housing starts are forecast to range from 153,000 units to 203,000 units, with a point forecast of 178,150 units.
- In 2017, we expect starts to range between 149,000 and 199,000 units, with a point forecast of 173,650 units.
- MLS® sales are forecast to range from 425,000 units to 534,000 units in 2016 and from 416,000 units to 536,000 units in 2017, with respective point forecasts of 479,500 and 476,000 units.
- The average MLS® price is forecast to be between $420,000 and $466,000 in 2016 and between $424,000 and $475,000 in 2017, with respective point forecasts of $443,300 and $449,600.
- Economic trends in Ontario should improve as manufacturing exporters benefit from declining input costs as a result of lower oil prices, lower interest rates, and a lower Canada/U.S. exchange rate.
- Other than a modest amount of overvaluation at the national level, housing market conditions are expected to remain balanced and broadly in line with key indicators such as employment, personal disposable income, mortgage rates and population growth.
There are definite opportunities in key areas of Ontario for new construction. The key is to capitalize on the stability that’s expected over the course of the next two years.
MarshallZehr’s One Plan, One Capital Source can help you with stable funding to help your project move forward to completion.