Greater Toronto Housing Market Outlook

Housing starts will remain strong
Overview
Housing starts:
very strong at 222,200 units in 2006
and 204,100 units in 2007. By next
year, housing starts will have been
above the 200,000 unit level for six
consecutive years.
Starts will remain
Resales:
established a new record of nearly
483,000 units in 2005. Sales of
exisiting homes will moderate slightly
to 478,400 units in 2006 and to
460,200 units in 2007.
Sales of existing homes
Resale prices:
homes will increase by 11.2 per cent
in 2006, their strongest growth in
17 years. In 2007 price growth will
slow to 4.8 per cent as markets
become more balanced.
Prices for existing
Provincial SPOTLIGHT
2 NATIONAL OUTLOOK
3 TRENDS IMPACTING
HOUSING
5 SPECIAL REPORT:
Housing Starts 2006 to
2010
8 PROVINCIAL REPORTS
8
British Columbia
9
Alberta
10
Saskatchewan
11
Manitoba
12
Ontario
13
Quebec
14
New Brunswick
15
Nova Scotia
16
Prince Edward Island
17
Newfoundland and Labrador
18 FORECAST TABLES
CMHC Housing Market
Outlook Canada
national sales, marketing, and
business planning tool.
is your
Date Released: Second Quarter 2006
Canada
Canada Mortgage and Housing Corporation
www.cmhc.ca
Housing starts:
2006: 222,200
2007: 204,100
Resales:
2006: 478,400
2007: 460,200
British Columbia:
high by historical standards reflecting continued strong employment and
income growth. As a result, housing starts will increase to 37,000 units in
2006 and edge down to about 35,000 units in 2007. (Details on Page 9)
New home construction in 2006 and 2007 will remain
Alberta:
workers from other parts of Canada seeking job opportunities. The
combination of a strong job market and population growth will keep total
housing starts above the 40,000-unit mark in each of 2006 and 2007.
(Details on Page 10)
Alberta’s vibrant job market will continue to be a magnet for
Page 2, Housing Market Outlook, Canada Edition, Second Quarter 2006
National Housing Outlook
In Detail
Housing starts in Canada are forecast to decline 1.5 per
cent this year to 222,200 units. Still, 2006 will be the fifth
consecutive year in which housing starts exceed the
200,000 unit threshold. This forecast of 222,200 starts
represents an upward revision from our previous forecast
of 208,700 starts published in February. The revision
is due mainly to the stronger-than-expected demand in
Alberta and B.C.. Residential construction will continue
to slow next year with national housing starts easing 8.1
per cent to 204,100 units.
Low mortage rates, high employment levels and rising
incomes will continue to support a historically high level
of new home starts in 2006. Nevertheless, a number of
factors will cause construction activity to moderate this
year and next. The pent-up demand that built up during
the 1990s is now being fulfilled. As a result, housing starts
will gradually move in line with demographic fundamentals.
Higher mortgage carrying costs, due to increases in
mortgage rates and continued price growth, will temper
housing demand. Demand from first-time buyers, many of
whom do not have the equity to draw on for a down
payment, will ebb. The rising cost of homeownership
relative to renting will also decrease first-time home
buying activity.
In the Ontario, Quebec and Atlantic regions, a rising
supply of listings and lower average prices for existing
homes compared to new homes will attract many home
buyers toward the existing home market. Increased
choice in the existing home market compared to the
previous years will reduce the spillover of demand from
the existing to the new home market. Moreover, demand
for new homes will slow as easing resale price growth
coupled with rising construction costs contribute to a
growing price differential between new and existing
homes. However, in Alberta and B.C., strong job growth willl
continue to attract workers from other parts of the country.
The resulting strong demand for housing will keep both
housing starts and MLS® sales growing in 2006.
Starts of single homes to fall in 2006 and 2007
The slowing trend that started in 2005 will continue this
year and next. Single detached starts are forecast to fall
by 3.1 per cent to 116,700 units in 2006 and slide by an
additional 9.5 per cent to 105,600 units in 2007.
The decline of single detached housing starts will be
experienced in most provinces across Canada in 2006. In
percentage terms, the largest declines will be in Ontario
(14.8 per cent), Newfoundland (13.2 per cent), PEI (12.5
per cent), and Québec (10.2 per cent). The Prairie region
and B.C. will buck this downward trend with gains in all
four provinces (1.1 per cent, 7.2 per cent, 14.3 per cent,
10.1 for Manitoba, Saskatchewan, Alberta, and B.C. respectively).
Multi-family home starts to remain strong
Multi-family housing starts (semi-detached, row, apartment
units) will increase slightly to 105,500 units in
2006, up 0.5 per cent from the 18-year high of 105,018
units in 2005. Starts will remain at a high level in 2007
but will decline by 6.6 per cent to 98,500 units. The fall in
multiple starts will be smaller than for singles. This reflects
the higher mortgage carrying costs and the shift in
demand from homebuyers toward less expensive homes.
Apartment starts which make about two thirds of total
multi-family starts, will increase this year by 3.5 per cent
while semi-detached and row starts will moderate 5.9
per cent and 5.1 per cent respectively.
The small gains in multiple starts forecast in six out of
ten provinces in 2006 will be mostly offset by the weakness
expected in Québec (where multiple starts are
forecast to decrease by 12.9 per cent).
MLS® sales to taper off
Existing home sales, as measured by the Multiple Listing
service (MLS®), reached a record level for the fifth
consecutive year in 2005. However, four consecutive
years of strong price growth combined with rising
mortgage rates will ease demand for existing homes in
many centres across the nation. MLS® sales will dip 0.9
per cent to 478,400 units in 2006 and will decrease an
additional 3.8 per cent to 460,200 units in 2007. The
rising supply of new listings will give home buyers more
choice and will help keep MLS® sales strong, making
2006 the second best year on record.
Sales will edge lower in all regions except in the prairies.
MLS® sales will rise by 3.8 per cent, 5.9 per cent and
10.8 per cent for Manitoba, Saskatchewan and Alberta
respectively.
Record double digit gains for MLS® price in 2006
Despite the slowing trend in Ontario, Quebec and the
Atlantic region, the accelerating price growth in western
provinces will lead to a 17-year high price increase of
11.2 per cent in 2006. In 2007, higher listings and lower
MLS® sales will move the resale market toward more
balanced conditions and growth in average MLS® prices
wil slow to 4.8 per cent.
Housing Market Outlook, Canada Edition, Second Quarter 2006, Page 3
Trends Impacting Housing
The Economy
Canada’s real gross domestic product (GDP) grew by 2.9
per cent in 2005. Consumer spending, which expanded
by 4.0 per cent during the year, was a key contributor to
economic growth. The strength in consumer spending
reflected low interest rates, strong job markets, and rising
incomes. Indeed, strong gains in personal disposable
income caused the personal savings rate to return to
positive territory by the end of last year. Low interest
rates also boosted investment spending by businesses in
2005 as did strong corporate profits. Investment in
machinery and equipment, which advanced by nearly 11
per cent, was particularly strong. A significant share of
this machinery and equipment is imported, therefore, the
high value of the Canadian dollar has made these investments
more cost effective. On the downside, the high
value of the Canadian dollar continues to challenge the
competitiveness of Canadian goods and services. As a
result, import gains have outpaced those of exports,
which in turn has dampened overall GDP growth.
The Canadian economy is currently operating very close
to its capacity. As a result, there is a risk that upward
pressure on inflation could start to build. In fact, evidence
of rising cost pressures are already evident; growth in
wages and salaries has accelerated since the beginning of
2005. So far, there has been no pass-through of these
rising costs to core consumer price inflation; however,
further reduction in monetary stimulus may be required
to keep inflationary pressures in check.
Mortgage Rates
The Bank of Canada raised its target for the overnight
rate by one-quarter of one percentage point on April 25
th
to 4 per cent. Short term rates will continue to rise in
2006 as the Bank of Canada removes the excess monetary
stimulus at a measured pace. We expect one
additional 25 basis point hike in 2006, bringing the target
for the overnight lending rate to 4.25 per cent by the
end of the year. It should be noted, however, that the
moderating impact of the strong Canadian dollar on
economic growth has lessened the need for increases in
short-term interest rates in Canada.
Mortgage rates will remain low, rising moderately in 2006.
Posted mortgage rates are expected to rise by 25 to 75
basis points in 2006. One, three and five-year posted
mortgage rates are forecast to be in the 5.50-6.50, 5.75-
6.75, and 6.00-7.00 per cent ranges respectively in 2006.
In 2007, one, three and five-year mortgage rates are
forecast to rise by an additional 25 basis points.
Migration
Immigration into Canada is set to exceed the 220,000 to
245,000 target range for new permanent residents per
year in 2006 and 2007. Net migration (immigration
minus emigration) will increase by 7.6 per cent to about
225,000 people in 2006 and by an additional 4.7 per cent
to 235,500 net migrants in 2007. Strong net migration
will continue to support housing demand with the
majority of newly arrived immigrants initially settling in
rental accommodations. An increasing share of migrants
will move into home ownership as time passes.
Strong employment growth in Alberta and B.C. has
attracted a larger number of workers from other provinces.
Strong positive net-interprovincial migration in
Alberta and B.C. will help support high demand for both
rental and ownership housing in these provinces in 2006
and 2007.
Employment and Income
The creation of nearly 1.4 million net new jobs since the
start of 2002 caused the unemployment rate to fall from
8 per cent to an all-time low of 6.4 per cent in February
2006. As a result, a record share of Canadians are employed
and future job growth will become increasingly
constrained by growth in the population. A surge in new
jobs in the latter half of 2005 will result in an elevated
launching point for the annual average employment level
in 2006. Hence, employment is forecast to grow by 1.7
per cent this year and 1.5 per cent in 2007. The unemployment
rate will fall for a fourth consecutive year to
6.5 per cent in 2006; in 2007 the unemployment rate will
decrease to 6.3 per cent.
Alberta will lead the rest of Canada with 3.1 per cent
employment growth in 2006 and 2.0 per cent growth in
2007. Employment growth will also be relatively strong
in British Columbia at 2.9 per cent in 2006 and 2.3 per
cent in 2007. In contrast, lacklustre job growth will be
recorded in Atlantic Canada this year and next.
The tight labour market conditions have been reflected
in an acceleration in wage gains during 2005; growth in
both average weekly earnings and personal disposable
income strengthened throughout the year. Recent
income and empoyment growth have helped boost
consumer confidence and will continue to support high
levels of housing starts in 2006 and 2007.
Housing Market Outlook, Canada Edition, Second Quarter 2006, Page 4
Trends at a Glance
Factor Comment
Mortgage Rates
Employment
Income
Net Migration
Natural Population
Increase
Consumer Confidence
Resale Market
Vacancy Rates
Key factors and their Effects on Residential Construction
Mortgage rates will rise marginally in 2006 and 2007, but will remain low. Rising
mortgage rates, combined with rising house prices will push up mortgage carrying
costs. These higher mortgage carrying costs will cool home ownership demand.
With the economy now operating at full employment, future job growth will be
increasingly constrained by population growth. Job creation will continue to
stimulate housing demand, although not by as much as in previous years.
Growth in personal disposable income has strengthened steadily throughout 2005.
Tight labour markets and continued strong demand for workers will continue to
support strong income growth, which will partially offset the negative impact of
higher mortgage carrying costs on home ownership demand.
Net migration is expected to continue to rise in 2006 and 2007 as international
immigration continues to strengthen. Toronto, Vancouver and Montreal will be the
major beneficiaries as most immigrants settle in these centres. Typically, newly
landed immigrants rent at first, with an increasing percentage moving into home
ownership over time.
Because Canada’s population is aging, a smaller proportion of people are in their child
bearing years and the birth rate is slowing. The increase in the natural population
(births - deaths) will continue to slow in the years ahead which will eventually
lessen the need for additions to the housing stock.
Consumer confidence, as measured by the Conference Board of Canada, remains
high and strong consumer sentiment is expected to prevail throughout 2006. This
will support strong demand for home ownership.
After reaching a new record level in 2005, MLS® sales will moderate slightly in
2006 and 2007. Easing sales combined with an increasing number of new listings
will result in a decrease in price pressures this year and next as the resale market
moves into more balanced territory. As a result, the rate of increase in the average
existing home price will slow this year and next.
The growth in rental demand due to increased immigration will be offset by modest
rental construction, and increased competition from the condo market. As a result,
vacancy rates across Canada’s metropolitan centres will edge higher in 2006.
Housing Market Outlook, Canada Edition, Second Quarter 2006, Page 5
Special Report: Outlook for Housing Starts 2006-2010
The outlook for the housing market remains very upbeat for 2006 and 2007 with housing starts remaining above the
200,000 unit threshold in both years. What does the future hold beyond 2007? In this report we will present our
long term projection for housing starts and highlight some of the key regional trends.
Economic and demographic conditions will continue
to support a high level of housing starts
The outlook for Canada is very upbeat, however, the
economy is operating at capacity. Our forecast for economic
growth of roughly 3 per cent in 2006 and 2007 implies that
capacity constraints will still prevail in 2008 as we enter into
the horizon of our long term forecast. As a result, real GDP
in Canada is forecast to continue to grow at a pace that is in
line with the country’s potential rate of growth; about 3 per
cent annually from 2008 to 2010.
These capacity constraints will be mirrored in the labour
market, which is very tight. A a record share of Canadians
are currently employed, therefore, job creation will be
constrained by growth in the population. Over the 2008 to
2010 period, employment growth will average 1.4 per cent
annually; a pace sufficient to keep the unemployment rate
near 6 per cent.
When the economy operates at or above its capacity for an
extended period of time, there is a significant risk that
inflationary pressures will start to build. Because of this, the
Bank of Canada has been increasing short-term interest
rates with the objective of removing excess monetary
stimulus from the economy. At this point, the rise in shortterm
interest rates has largely run its course, however, we do
expect longer term interest rates to continue to increase
gradually over the next 5 years. As a result, mortgage rates
are expected to edge higher between 2008 and 2010.
The rate of increase in house prices will slow as resale
markets become more balanced later in the decade. The
average MLS house price will grow in the 2.5 to 3.5 per cent
range between 2008 and 2010. This pace of price growth
represents a marked slowing from the pace of over 11 per
cent forecast for 2006, nevertheless, when combined with
higher mortgage rates, it will contribute to increasing mortgage
carrying costs.
Favourable economic conditions, such as relatively low
mortgage rates can boost demand for housing, particularly
in the short to medium term; population growth is a key
driver of housing demand in the longer term. In recent
years, a key source of population growth has come from
immigration. Over the 2008 to 2010 period, tight labour
market conditions will provide an attractive environment
that will continue to draw large numbers of immigrants to
Canada. As a result, total net migration is forecast to rise
steadily from about 223,000 people in 2005 to over
250,000 people in 2010. The rise in net-migration will
boost population growth and household formation, which
in turn will support high levels of housing starts through
2010.
Housing starts will remain high but will slide gradually
between 2008 and 2010
The pace of housing starts has been running ahead of
demographic requirements since 2002 and will continue to
do so for the next several years. Because of this, the significant
pent-up demand that accumulated over the 1990s is
wearing off. Looking ahead to the 2008 to 2010 period,
housing starts are expected to continue to slow gradually,
dipping below 200,000 units to reach 193,900 starts in
2008. By 2010, starts will slow to about 184,000 units.
continued on page 7....
Page 6, Housing Market Outlook, Canada Edition, Second Quarter 2006
The decrease in starts will be more pronounced for
single homes
Starts of multiple family dwellings, such as apartments, semidetached
and row houses, will not decrease as rapidly as
starts of single family homes. There are several reasons for
this, but the two key ones are: Multiple-family homes are
less expensive on average than singles. Therefore, following
several years of strong house price appreciation, the continued
rise in mortgage carrying costs will cause demand to
shift away from singles toward multis. Second, immigration
will be the major contributor to population growth over
the forecast period and most immigrants tend to settle in
rental housing when they first arrive in Canada. Therefore,
high demand for rental housing will boost multiple starts
relative to single starts. Multiple starts will decrease by 8.6
per cent between 2008 and 2010 to reach 90,000 units.
Starts of single homes over this period will drop by 10.6
per cent to reach 94,400 units.
Provincial details: 2006-2010
The declining trend in Canadian housing starts over the
2008 to 2010 period will be reflected in all provinces
except Manitoba, where starts are forecast to climb to
5,600 units by 2010, about 18 per cent above their 2005
level.
Newfoundland and Labrador
GDP will be negatively affected by expected declines in
oil production at Terra Nova and Hibernia, as these
projects will be passed their production peaks. The $2
billion windfall from the Atlantic Accord deal and sustained
increases in federal transfers have significantly
improved the province’s fiscal outlook, however, the
province has the highest per capita debt levels in the
country. Therefore, fiscal restraint measures will remain
a drag on the economy. Population losses will continue,
reflecting ongoing negative net-migration patterns and a
continuing decline in the natural population. Given the
current demographic and economic outlook, a gradual
decline in housing demand is anticipated. Housing starts
will decrease to 1,900 units in 2008 and reach 1,800
units in 2010.
Prince Edward Island
The Island’s economy will grow at a modest pace between
2008 and 2010. The Island’s traditional sectors,
tourism, agriculture and fisheries are all expected to
contribute to the positive outlook, however, efforts to
diversify the Island’s economy will decrease its reliance
on these primary industries going forward. The modest
economic growth in P.E.I. will be reflected in weak employment
growth. Net-migration will remain positive as
people continue to return to the Island to either finish
out their careers or retire. This increase in population
should serve to maintain the demand for housing. Housing
starts will decrease to 670 units in 2008 and will
reach 645 units in 2010.
Nova Scotia
Tepid economic and employment growth is expected in
Nova Scotia through 2010, with a steadily increasing
share of growth being delivered through investment as
non-residential construction activity ramps up and
consumer spending slows. Provincial housing market
activity is forecast to peak in 2006, afterwhich successive
annual declines in MLS sales and total housing starts are
expected. Housing starts will decrease to 4,500 units in
2008 and by 2010 they will fall to 4,050 units.
New Brunswick
Modest economic growth is expected in New Brunswick
over the 2008 to 2010 period. Overall population
growth will be modest, however, intra-provincial migration
toward the province’s largest urban centres will
create some demand for new homes. However, rising
mortgage rates and weak employment growth will cause
housing starts to decrease from just under 3,300 units
in 2008 to 2,950 units in 2010.
Quebec
While slower employment growth, rising interest rates,
and increased supply on the resale market will lower the
demand for new homes in the next five years,
immigration and the aging of the population shall
moderate this decline. Housing starts should thus
decrease to 38,000 units in 2008 and reach 36,000 units
in 2010. Given the aging of the population, it is expected
that multi-family housing will make up a larger share of
new home construction. Many retiring baby boomers wil
opt for condominium apartments, while many members
of older age groups will move into retirement
residences.
Ontario
Economic growth in Ontario will be modest in the near
term but will converge on the Canadian average by 2008.
Slower job growth, lower levels of in-migration, and a
more balanced resale market will cause demand for new
homes to moderate. New construction demand will also
be constrained by supply considerations - namely tighter
supply of serviced lots available for residential development.
Ontario home starts will decrease to 66,000 units
in 2008 and will continue to trend lower, reaching
64,000 units by 2010. Modestly priced multi family
homes will capture a larger share of new construction
activity.
continued on page 8....
Housing Market Outlook, Canada Edition, Second Quarter 2006, Page 7
Manitoba
Housing starts are expected to remain high in Manitoba
for the next few years fuelled by continued population
and household growth as well as favourable economic
conditions. In Winnipeg there appears to be some pentup
demand as household growth has outstripped the
growth of the housing stock for several years. With little
selection in the resale market, home buyers will continue
to be pushed to the new home market keeping singlefamily
starts high. Housing starts will increase to 5,200
units by 2008 and rise further to 5,600 units by 2010.
Saskatchewan
Saskatchewan will continue to benefit from high demand
for its natural resources yielding robust economic
growth. Net-migration will remain negative but will
improve steadily throughout he forecast period. Rising
prices and a slow increase in mortgage interest rates will
encourage first-time home buyers to return to the
existing home market. Housing starts will moderate to
3,500 units in 2008 and will remain at that level through
2010.
Alberta
Thanks to high levels of investment in the oil and gas
sectors, the Alberta economy is projected to grow at an
annual rate of nearly 4.0 per cent from 2008 to 2010.
Continued expansion of the economy means that the
province will have the lowest unemployment rate among
the provinces over the forecast period. As a result,
Alberta will continue to draw workers from other
provinces, however, the flow of inter-provincial migration
will moderate from current levels. Housing starts will
decrease to 37,700 units by 2008 and will reach 34,500
units in 2010.
British Columbia
New home construction in British Columbia will remain
above the 30,000 unit level during the next 5 years
supported by an expanding economy, growth in employment
and incomes and a continued inflow of people
from other parts of Canada and the world. During the
2008 to 2010 period, the provincial economy will expand
at an annual rate of 3.2 to 3.5 per cent. Consumer
spending and investment in both residential and nonresidential
structures will be the key drivers of economic
growth. Population growth will exceed the national
average as the province adds 50,000 people per
year on average from migration sources. Multiple-unit
starts will continue to account for more than half of new
homes started reflecting trends in urbanization, higher
resale prices, lifestyle choice and limited land supply in
urban markets. Despite the positive economic outlook,
housing starts will slow to a pace more in line with
demographics. Housing starts in B.C. will decrease to
33,200 units in 2008 and trend down to 31,400 units by
2010.
2 0 0 4 2 0 0 5 2 0 0 6 F 2 0 0 7 F 2 0 0 8 F 2 0 0 9 F 2 0 1 0 F
N ew fo u n d la n d 2 ,8 7 0 2 ,4 9 8 2 ,2 5 0 2 ,1 5 0 1 ,9 0 0 1 ,8 5 0 1 ,8 0 0
P rin c e E d w a rd Isla n d 9 1 9 8 6 2 7 7 5 7 4 5 6 7 0 6 4 5 6 4 5
N o v a S c o tia 4 ,7 1 7 4 ,7 7 5 5 ,1 0 0 4 ,8 2 5 4 ,5 0 0 4 ,1 7 5 4 ,0 5 0
N ew B ru n sw ic k 3 ,9 4 7 3 ,9 5 9 3 ,6 5 0 3 ,3 5 0 3 ,2 7 5 3 ,1 5 0 2 ,9 5 0
Q u eb ec 5 8 ,4 4 8 5 0 ,9 1 0 4 5 ,0 0 0 4 0 ,0 0 0 3 8 ,0 0 0 3 7 ,0 0 0 3 6 ,0 0 0
O n ta rio 8 5 ,1 1 4 7 8 ,7 9 5 7 5 ,0 0 0 6 8 ,5 0 0 6 6 ,0 0 0 6 5 ,0 0 0 6 4 ,0 0 0
M a n ito b a 4 ,4 4 0 4 ,7 3 1 4 ,8 0 0 5 ,0 0 0 5 ,2 0 0 5 ,4 0 0 5 ,6 0 0
S a ska tc h ew a n 3 ,7 8 1 3 ,4 3 7 3 ,6 0 0 3 ,6 0 0 3 ,5 0 0 3 ,5 0 0 3 ,5 0 0
A lb e rta 3 6 ,2 7 0 4 0 ,8 4 7 4 5 ,0 0 0 4 1 ,0 0 0 3 7 ,7 0 0 3 6 ,0 0 0 3 4 ,5 0 0
British C o lu m b ia 3 2 ,9 2 5 3 4 ,6 6 7 3 7 ,0 0 0 3 4 ,9 0 0 3 3 ,2 0 0 3 2 ,1 0 0 3 1 ,4 0 0
C a n a d a 2 3 3 ,4 3 1 2 2 5 ,4 8 1 2 2 2 ,2 0 0 2 0 4 ,1 0 0 1 9 3 ,9 0 0 1 8 8 ,8 0 0 1 8 4 ,4 0 0
T o t a l H o u s in g S t a r t s , C a n a d a a n d t h e P r o v in c e s
F: forecast
Page 8, Housing Market Outlook, Canada Edition, Second Quarter 2006
British Columbia
B.C. Starts (000’s)
Overview
In Detail
Single Starts:
remain the preferred product type for many
home buyers. However, relatively high new home
prices combined with the slight rise in interest
rates will dampen new construction of single
homes. Builders will start 15,100 single-detached
homes in 2006, up from the previous peak of just
over 14,000 units in 2004. Next year, 14,000
single starts are projected.
Single-detached housing starts
Multiple Starts:
the province’s urban centres will continue to
account for a significant share of new home
construction during the next two years. In total,
builders will start more than 21,900 units in
multi-family developments in 2006 and 20,900
units in 2007.
Large scale developments in
Resales:
home prices and new products on the market
mean that British Columbians will continue to
reassess their housing needs during the next two
years. First-time home buyers, move-up buyers
and investors will be active in the existing home
market, keeping the number of resale transactions
near the 100,000 unit level.
A strong labour market, increasing
Strong start to 2006 reflected in
outlook
New home construction recorded a strong start
in 2006, as the number of foundations poured
jumped by one-third over a relatively weak first
quarter of 2005. Builders responding to increased
demand for new homes were kept busy
as the number of units under construction hit
record high levels. However, as 2006 passes,
some moderation in new home markets will
occur as high prices and rising mortgage rates
temper demand. As a result, housing starts will
total 37,000 units in 2006 and 34,900 units in
2007.
In early 2006, broad-based growth in the
province is generating jobs in many sectors
including primary industries, construction,
transportation, retail trade and professional,
scientific and technical services. Last year, gains
in employment combined with wage increases to
push the level of wages and salaries up 6.1 per
cent, ahead of the 5.4 per cent gain in Canada.
Looking ahead, growth in incomes and high
levels of consumer confidence in the province
will translate into ongoing high levels of activity
in the housing sector.
Prices:
upward pressures on existing home prices. This pressure will gradually ease as
new listings increase next year and demand is tempered by rising mortgage
carrying costs. As a result, the average resale price in British Columbia will
reach $391,000 in 2006 and $418,000 in 2007.
Ongoing demand for housing in established neighbourhoods will put
Provincial Highlight
Migration is a key source of housing demand. In 2005, BC recorded
a net gain of 4,527 people from other provinces. While the figure is
lower than the level recorded in 2004, it is a significant
achievement given the strong pull of Alberta. BC’s resource-rich
neighbour gained almost 42,000 people from the rest of Canada
last year, exceeding the high annual totals that British Columbia
recorded during the early 1990s. On the international front, BC
welcomed about 38,600 people from other countries last year. As a
result of the combination of migration and natural increase, the
province’s population grew 1.3 per cent in 2005, compared to the
1.0 per cent national average.
The British Columbia economy will expand by 3.5 per cent annually in 2006
and 2007. Non-residential construction will remain strong due to infrastructure,
commercial and institutional building including projects related to the
2010 Winter Olympic Games. This year and next, global demand for commodities
such as copper and coal will fuel growth in the mining sector. On the
services side, strong consumer spending, partly driven by increased home
equity and rising incomes, will support growth in employment in retail and
wholesale trade and personal services.
The province’s population is expanding as more people move to British
Columbia than leave for other places. The province will welcome about
50,000 migrants this year from both international and interprovincial sources.
This will push population growth up to 1.4 per cent per year, from the low of
0.9 per cent recorded in 2002.
These economic fundamentals will support another solid year in both new
and existing home markets as British Columbia moves into the sixth year of
the current up-cycle in housing.
0
10
20
30
40
2003 2004 2005 2006 F 2007 F
Singles Multiples
Source: CMHC F: forecast
Housing Market Outlook, Canada Edition, Second Quarter 2006, Page 9
Alberta
Alberta Starts (000’s)
Overview
Strong economy powers housing
starts to highest level since 1978
At 40,847 units, housing starts in 2005
reached the highest total since 1978 and the
second best on record. Capacity constraints
and hefty demand have pushed a large number
of permits forward to 2006. As a result, total
starts are expected to reach 45,000 in 2006
before moderating to 41,000 in 2007.
Positive economic fundamentals and strong
net migration are the dominant forces fuelling
demand in the residential construction
sector. Economic growth projections remain
high in Alberta thanks to massive investment
in the oil sands sector. More than $96 billion
in energy related capital expenditures are in
the planning stages or underway in Alberta,
21 per cent higher than the previous year.
Additional projects in health care, education,
and infrastructure are being funded by Alberta’s
escalating budget surplus. Thanks to
heightened energy royalties, the current
budget surplus is projected to reach $7.4 billion,
$5.9 billion higher than original projec-
Since 1997, Alberta has led the country in the number of housing
starts per capita. In 2005, Alberta builders started 12.5 housing units
for every 1,000 residents, far exceeding second-strongest province
of British Columbia where 8.1 units were started per 1,000 residents.
Edmonton and Calgary led all Census Metropolitan Areas in
2005, with 13.1 and 12.9 starts per 1,000 residents, respectively.
Provincial Highlight
tions. Overall economic output is expected to expand by 4.6 per cent
in 2006 and 3.9 per cent in 2007.
Alberta’s employment opportunities and record low unemployment
rate will attract healthy levels of interprovincial migration over the forecast
period. Meanwhile, an aggressive Provincial Nominee Program is
expected to boost international migrants to Alberta to the highest totals
since 1990. Collectively, gains from net migration will add over
75,000 people to Alberta’s population over the next two years, providing
much needed additions to the labour force.
In 2005, employment in Alberta recorded its weakest growth rate in 12
years, as job gains were constrained by inadequate additions to the labour
force. While not alleviating all of the skilled labour shortages, the
gains in migration will enable employment to expand by 3.1 and 2.0 per
cent in 2006 and 2007, respectively. Expect the majority of these gains
to be in full-time positions.
Single Starts:
starts posted their best performance on
record, reaching 26,684 units. Expect a
new record of 30,500 starts to be achieved
in 2006, as builders work to satisfy demand
carried over from 2005. In 2007, singlefamily
starts will moderate to 27,000 units
as higher prices and additional resale listings
curb new single-family demand.
In 2005, single-detached
Multiple Starts
to a 24-year high of 14,500 units in 2006,
before slipping to 14,000 in 2007. Demand
from buyers seeking a less expensive alternative
to the single-family market will maintain
construction of multiple family homes
at high levels, as will strong interest from
investors.
: Multiple starts will climb
Resales:
sales in 2006 are expected to set new records of 73,000 in 2006
before moderating to 70,000 in 2007. Demand will remain elevated
thanks to strong net migration and a lack of inventory in the new
home market.
Despite a shortage of active listings in many markets, MLS®Prices:
listings will translate into short listing durations, multiple offers and
sales for more than the list price. As a result, the average resale price
is expected to jump 24 per cent in 2006, and 8 per cent in 2007
when more listings come on stream.
In many Alberta markets, record demand and a lack of active
In Detail
0
10
20
30
40
50
2003 2004 2005 2006 F 2007 F
Singles Multiples
Source: CMHC F: forecast
Page 10, Housing Market Outlook, Canada Edition, Second Quarter 2006
Saskatchewan
Saskatchewan Starts (000’s)
Overview
In Detail
Elevated commodity prices, Saskatchewan’s commanding position as
a leading producer of potash and uranium, as well as being second
only to Alberta in oil production has contributed to the province
earning approximately $1 billion more in revenues in 2005
compared to 2004. Nevertheless, employment gains and average
weekly earnings growth have been modest suggesting that housing
demand will continue at its present steady pace.
Housing starts remain elevated over
the forecast period
While housing starts will be down from the
recent peak of 3,781 units in 2004, they are
expected to remain at high levels in 2006
and 2007. Full-time job growth and an improved
migration picture should lead to
3,600 starts in both years.
Provincial economic growth over the next
two years should remain close to the national
average. Higher output in the oil and
natural gas, potash, and uranium industries
will help the economy grow by 2.9 per cent
in 2006 and 3.1 per cent in 2007. A strong
residential construction industry and improvement
in the agriculture sector should
also contribute to provincial GDP growth.
Meanwhile, heightened energy prices have
elevated resource royalties in the province,
leading to a healthy provincial surplus. As a
result, expect solid capital spending and tax
reform. In 2007, economic growth will get
a boost when production begins at the new
Cigar Lake uranium mine.
Economic growth will contribute to employment
gains of 0.5 per cent in 2006 and
0.8 per cent in 2007. While these growth
Provincial Highlight
Single starts:
conditions, CMHC has increased its
forecast for single-family starts to 2,600
units in 2006. Single starts will fall off to
2,450 units in 2007. New subdivisions in
Saskatoon and Regina will support the
increase in expected demand. Builders have
made an early start to the 2006 spring
construction season, aided by abnormally
warm weather. This will contribute to the
best starts performance since 1987.
In light of healthy economic
Multiple Starts:
housing starts has been shaved to 1,000
units in 2006, but multiple starts will rise to
1,150 units in 2007. The surge in lowerpriced
row housing starts has now
subsided and this market has returned to
the more traditional market of luxury
apartments and semi-detached
condominiums for seniors and empty-nesters.
The forecast for multiple
Resales:
a record 8,800 units in 2006. Listings have been trending up in the
first months of 2006, further reinforcing our positive forecast. We
expect a minor slip to 8,700 sales in 2007.
Early existing home sales statistics support our forecast for
Prices:
Saskatchewan will continue their upswing driven by record demand
and a shift in sales to higher priced homes. As a result, CMHC has
revised its forecast for MLS® prices upward in Saskatchewan to
$132,000 (up 7.5 per cent) in 2006 and $140,000 (up 6.1 per cent )
in 2007.
rates pale in comparison to what will be experienced nationally, the
gains will be suppressed by a low labour force expansion due to
persistent migratory outflows. This will push the unemployment
rate below five per cent over the forecast period for the first time
in 25 years. As a result, expect the majority of new jobs to be fulltime
positions. Saskatchewan should see 2,400 jobs created in 2006
and 3,900 in 2007.
In 2005, about 6,500 more people left Saskatchewan than those who
moved to the province. Moving forward, CMHC expects the tightening
labour market will reduce the loss of migrants to other provinces.
At the same time, Saskatchewan’s Provincial Nominee Program
will increasingly attract migrants from international locations,
helping compensate for the interprovincial declines. As a result, expect
an improvement in total net migration with losses declining to
their lowest levels in nearly 10 years.
Following an 11 per cent gain in 2005, average resale prices in
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2003 2004 2005 2006 F 2007 F
Singles Multiples
Source: CMHC F: forecast
Housing Market Outlook, Canada Edition, Second Quarter 2006, Page 11
Manitoba
Manitoba Starts (000’s)
Single Starts:
starts will continue to post gains over the
forecast period as builders strive to satisfy
pent-up demand created by several years of
household growth surpassing housing starts.