Canada's housing agency sees softer starts, higher prices in 2014

Reuters

By Andrea Hopkins

TORONTO, May 22 (Reuters) - Canada federal housing agency lowered its forecast for housing starts but not prices in 2014 and said sales and construction will be flat or barely higher in 2015 as the once-roaring market adjusts to a glut of condominiums coming onto the market.

Canada Mortgage and Housing Corp said the nation's housing boom is coming to an end in what officials hope will be a soft landing as construction slows to more sustainable levels and sales and prices tick only slowly higher.

The CMHC said on Thursday housing starts will be in a range of 172,300 and 189,900 units in 2014, with a point forecast, or most likely outcome, of 181,100 units, down from 187,923 units in 2013. That is also down from CMHC's February estimated of 187,300 starts.

The agency said there will be 160,600 to 203,600 units started in 2015, with a point forecast of 182,100, also a downwardly revised forecast.

Both forecasts represent a sharp slowdown from the 214,827 starts of 2012, when the market was at record highs and the government intervened to tighten mortgage lending rules.

"Builders are expected to continue to manage their starts activity in order to ensure that demand from buyers seeking new condominium units is first channeled toward unsold completed units or unsold units that are currently under construction," Mathieu Laberge, deputy chief economist for CMHC, said in a statement.

Canada sidestepped the worst of the financial crisis of the last decade because it avoided the real estate excesses of its U.S. neighbor, and a post-recession housing boom helped it recover more quickly than its Group of Seven peers.

But the housing market began to cool in mid-2012 after the country's Conservative government, worried about a potential property bubble, tightened mortgage rules. Demand fueled a strong rebound in 2013, and economists are largely predicting a softer but stable market this year.

The CMHC forecasts see homebuilding and sales leveling off, with prices continuing to notch small gains.

CMHC said existing home sales will range from 428,100 and 487,700 units in 2014, with a point forecast of 457,900 units. That's down from February's forecast of 466,500 units but little changed from 457,338 units sold in 2013.

For 2015, it expects a move up in sales to a range of 441,800 to 500,400, with an increase in the point forecast to 471,100, down slightly from its February forecast.

Price will continue to rise, and the agency even nudged up its forecast for price appreciation in 2014 given the strong start to the year, but said gains will slow in 2015.

CMHC's point forecast for the average price calls for a 3.5 percent gain to C$396,000 in 2014, and a 1.6 percent gain to C$402,200 in 2015.

(Reporting by Andrea Hopkins; Editing by Sofina Mirza-Reid)

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