CMHC Predicts Market 'Moderation' Over Next Two Years

Resale market to see lower sales, higher inventories around Metro Vancouver: CMHC

"Over the next two years, we expect the resale market will be characterized by lower sales, higher inventories of homes for sale, and lower home prices compared with the recent market highs in the last two years", said Eric Bond, CMHC's principal market analyst for Vancouver.

CMHC expects MLS resales to drop from 8,464 units in 2017 to 6,500-7,500 sales this year. It said, "Rising mortgage rates since May 2017 and stricter borrowing requirements are also having an impact on potential home buyers through two channels; 1) rising rates increase the carrying cost of holding a mortgage and; 2) rising rates have an impact on borrowing capacity".

The national housing agency said housing starts and sales are both expected to decline in 2019 and 2020. However, in suburban areas, like Peel, Durham and York Regions, there will be higher concentrations of single-family detached sales and listings, and that will slow price appreciation.

"MLS sales in Alberta are projected to be lower in 2018 compared to 2017". Average house prices are anticipated to range between $501,400 and $521,600 across the country. CMHC forecast range is: $387,100 to $390,500 this year; $390,000 to $393,700 in 2019; and $394,000 to $398,600 in 2020. While economic growth has generated employment gains, full-time employment in Alberta is still recovering from the last oil price shock. For 2019, sales are expected to rise slightly, coming in between 478,400 and 497,400 units. Full-time employment has still not returned to the level reached back in 2015. "It is likely that condo prices will continue to rise, albeit at a slower pace, until more supply is introduced into the market over the next two years".

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The agency is forecasting the average B.C. MLS home sale price to be between $683K and $749K this year (2017 average sale price was $709,597).

In the rental market, CMHC forecasts demand will strengthen and rent will stabilize over the next two years, but vacancy rates will remain above historical levels.

"Net interprovincial migration is turning positive and these new households will help lower the vacancy rate in Alberta". Rental incentives in the marketplace are expected to gradually decline over the forecast period. While home price growth slowed in 2018, prices still remain above inflation and are outpacing expected targets.

Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.

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