New home construction will begin to slow in 2008, but will remain high by historical standards, according to Canada Mortgage and Housing Corporation’s third quarter Housing Market Outlook, Canada Edition report.
Higher mortgage carrying costs will be a catalyst for the decrease in residential construction to 215,475 units in 2008, from 228,343 in 2007. As a result, seven of the 10 provinces will register a lower number of housing starts in 2008 than in 2007.
“Strong economic fundamentals such as continuing high employment levels, rising incomes and low mortgage rates will provide a solid foundation for healthy housing markets this year,” said Bob Dugan, chief economist for CMHC. “Increased competition from the existing home market, coupled with the elimination of the pent-up demand that built up during the 1990s, will exert downward pressure on housing starts, which will decline to 194,000 units in 2009 from 215,000 in 2008.”
Manitoba's solid economic performance and tight labour market conditions have boosted net migration to levels not seen since 1982 and have contributed to healthy levels of new home construction, according to the CMHC report.
Total housing starts reached 5,738 units in 2007, the best performance in 20 years. Starts will edge down to 5,400 units in 2008 before rebounding to 5,550 in 2009.
The average MLS® price in Manitoba increased 12.6 per cent in 2007 and will continue to increase by 14.1 per cent in 2008 and 7.8 per cent in 2009.
Across Canada, CMHC is predicting existing home sales, as measured by the Multiple Listing Service®, are expected to fall by 11.9 per cent in 2008 to 458,300 units. In 2009, the trend will continue with a decrease by 2.6 per cent to 446,600 units .
Despite a slowdown of MLS® sales, demand remains strong by historical standards across Canada.
Locally, the WinnipegREALTORS® Association reported another strong year for MLS® real estate activity.
“Over $1.3 billion in sales activity (by the end of July) is a wonderful performance by MLS®,” said Darlene Clare, president of the WinnipegREALTORS® Association.
For the first seven months of the year, dollar volume sales rose by 13.47 per cent in Winnipeg when compared to the same period in 2007.
For 2008 and 2009 in Canada, MLS® price growth will remain above inflation. Prices will increase this year by 3.3 per cent to $317,450 and increase by three per cent to $327,000 in 2009.
“The increase in housing prices (this year) is pulling back from the record-setting pace of last year,” said Canadian Real Estate president Calvin Lindberg, “but we have yet to see any of the price contractions that have impacted the housing market in the United States.”