At the end of May, the Canada Mortgage and Housing Corporation (CMHC) released its second quarter Housing Market Outlook for 2015.
Overall, the federal agency expects that the Canadian housing market will remain stable, with the national average price of a home ranging between roughly $400,000 and $440,000. For 2016, CMHC says that with the drop in oil prices, “our assessment is that there is more downside risk than upside risk to our forecast.” Nationally, housing starts (the number of new units constructed) are also expected to taper off this year and next.
But the picture isn’t a uniform one across the country. “Lower oil prices are contributing to disparities between provincial housing markets,” said the CMHC’s chief economist, Bob Dugan, in a press release. “Moreover, since the inventory of completed and unabsorbed units remains above the historical average, we expect the pace of new home construction to moderate over the next couple of years as builders focus on managing the existing inventory.”
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Here’s a regional breakdown of the CMHC Q2 housing market update, and how the Crown corporation sees things panning out over the next year.
British Columbia: Sky-High Price Growth
B.C. will be largely unaffected by the drop in oil prices. “Housing starts remain relatively stable this year and next, supported by growth in employment and population,” says Carol Frketich, the CMHC’s B.C. regional economist.
To shelter that growing population, housing starts are projected to rise slightly in 2016, with as many as 30,000 new units (ranging from condos to detached homes) coming onto the market. But demand still outweighs supply and, not surprisingly, the average housing price in the province far exceeds the national average, with average prices for 2015 projected to be between $573,700 and $627,500, driven by ever-hot markets in Vancouver, Abbotsford, Victoria, and Kelowna.
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Prairie Provinces: Weathering Oil’s Downturn
Most Albertans are used to riding the peaks and valleys of the oil economy. For 2015 and 2016, they’ll be facing a downward slide. “Demand for housing is expected to moderate as the oil price shock works its way through the economy,” says the CMHC’s regional economist, Lai Sing Louie. Specifically, housing starts, which hit 40,590 units in 2014, could drop below 30,000 in 2016. The economic slump will lead to a more buyer-friendly market. The 2014 average price of just above $400,000 could dip down to as low as $360,000 next year.
Also read: Low Oil Leads to Slower Home Sales>
Saskatchewan will also feel the impact, with both housing starts projected to drop from 8,257 units in 2014 to around 6,000 this year and next, and the average price of homes projected to be on either side of $300,000.
Moving further east, while the CMHC does feel Manitoba has an “elevated” housing supply, starts and prices are both expected to be relatively stable, with the average price provincially to be close to the 2014 figure of $266,329.
Ontario: Land of the Bidding War
In recent years, the country’s one-time economic engine has taken a bit of a backseat to B.C. and Alberta. But it hasn’t been an easy ride for would-be buyers, particularly in Toronto where fixer-uppers in some parts of the city are going for more than $1-million, and tales of bidding wars driving prices $100,000 or more above asking are commonplace.
The CMHC projects a relatively stable market for the province, though they expect more movement in the resale market (which is typically cheaper than new housing), stronger demand outside the GTA, and for more people to opt for renting over ownership.
Quebec: Ready for a Real Estate Boom
The CMHC sees la belle province as poised for growth. “A gradual acceleration of Quebec’s economic growth over the next two years will provide some stimulus to housing demand in 2015 and 2016,” says Kevin Hughes, CMHC regional economist for the province of Quebec. A moderate level of housing starts this year will be followed by an upswing in 2016, with the total number of units to be built expected to approach 29,000. A large portion of those will be multi-unit apartments geared to retirees. Average prices could climb as high as $295,000 in 2016.
Atlantic Canada: Small Victories
The Atlantic provinces are perpetually challenged economically, with a relatively small population spread across a vast area, and little large-scale industry outside of natural resources, so the oil price drop will have a negative impact on housing starts, with a moderate decline. That said, the CMHC projects a “modest gain” in housing prices of about 1 percent in 2016.