While financial analysts love to exalt the health of the market one minute and beat the drum for doom and gloom the next, the truth usually falls somewhere in the middle. It doesn’t make for as exciting newspaper copy, but all markets work in cycles and waves, growing and shrinking based on any number of economic factors. Despite the amount of ink being devoted to Canada’s cooling housing market, consumers should feel safe in the knowledge that while there may be some financial belt-tightening on the horizon, it’s not the end of the world.
At least, that’s the takeaway from the new forecast by the Canada Mortgage and Housing Corporation.
“A weaker outlook for global economic conditions and the waning of the effect of pre-sales from late 2010 and early 2011, which contributed to support multi-family starts this year, will bring moderation in housing starts next year,” said Mathieu Laberge, deputy chief economist at CMHC. “Nevertheless, employment growth and net migration will help support housing starts activity going forward.”
While the CMHC’s outlook leaving 2012 and going into 2013 predicts declines in new home construction, existing home sales are forecasted to rise. Housing starts are anticipated to be in the range of 210,800 and 216,600 in 2012, declining to between 177,300 and 209,900 in 2013. On the other hand, existing home sales, which are expected to be in the range of 449,200 and 465,000 in 2012, will rise to the range of 433,300 and 489,700 in 2013.
In addition to increased existing home sales, the CMHC predicts a rise in home prices going into the new year, with a 0.2 percent increase in 2012 and a 1.5 percent increase in 2013.
Blame for the decrease in new home construction is being directed at tighter mortgage restrictions put in place by Finance Minister Jim Flaherty. The maximum amortization period on government-insured mortgages was shortened from 30 years to 25 years in July, and the maximum amount homeowners can borrow against the value of their homes was lowered from 85 percent to 80 percent during the same time. These restrictions, along with the new B-20 mortgage guidelines, were enacted to curb growing household debt among citizens looking to take advantage of low mortgage rates.
While analysts continue to discuss the cooling effects these restrictions will have on the market, the CMHC report indicates moderate growth for Canada’s housing market, not a standstill.