Canada Mortgage Housing Corporation cuts housing forecast

Dated Nov 7, 08
By Tony Wong, Business Reporter

Canada Mortgage and Housing Corp. has reduced its forecast for 2009 amid slowing economic growth in Ontario.

“Clearly, economic growth in Ontario is slowing and that will  an impact,” CMHC Ontario regional economist Ted Tsiakopoulos said in an interview yesterday. “All factors suggest this will translate into a slower period of housing demand.”

Ontario housing starts were forecast to hit 74,500 at the end of this year and slide to 65,000 units next year. That number has been revised down to 62,000. Existing home sales, projected at 187,000 sales this year, is forecast to be 173,000 for 2009. The original forecast was for 178,000 sales.

“Housing starts have been moving above demographic trends in recent years and this situation is expected to be reversed,” CMHC stated in a housing outlook report.

Meanwhile, Canadian municipalities issued $6.5 billion in building permits in September, up 13.4 per cent from the month before, according to figures released by Statistics Canada yesterday.

The increase comes on the heels of a 11.7 per cent decline in August and is attributable to gains in the non-residential sector, particularly medical and educational buildings in Ontario and Saskatchewan, the government agency said.

The value of residential permits fell for a second month in a row, the result of fewer permits issued for multi-family dwellings such as condominiums.

“It is clear that the housing sector remains under pressure and it is non-residential activity that continues to prop up building activity,” Charmaine Buskas, senior economics strategist at TD Securities stated in an economic note. “As Canada’s economy continues to unwind, that too, will start to give way to weaker activity.”

In the key Toronto market, permits were up by 6.3 per cent, largely because of a 56.3 per cent increase in non-residential permits. Residential permits fell 27.4 per cent as the housing sector, particularly the condominium market, sees a pullback.

“Consumer confidence is more uncertain, equity requirements and borrowing costs are higher, banks are skittish and the increasing inventory of unsold units may hold some developers back,” condominium market research company Urbanation said in a report yesterday.

Fifteen new highrise projects opened in the Toronto area in October, just as the credit crunch decimated global stock markets.

However, while CMHC has revised its forecast for existing home sales in the province, the federal housing agency says the numbers are equivalent to the 2001 to 2002 period and still relatively solid.

“It will certainly be slower, but those are still decent numbers,” Tsiakopoulos said.

CREA cuts forecast

According to another report released yersterday Canadian Real Estate Association (CREA) revised its national housing prices forecast. In August, the Canadian Real Estate Association forecast a 2.6 per cent increase in national housing prices for 2008 and another 2.1 per cent next year. Yesterday, CREA released a new forecast, calling for a 0.6 per cent slide this year and a further 2.1 per cent drop in 2009. “This is in line with the downward revisions of the Canadian economic and job growth forecasts,” CREA chief economist Gregory Klump said yesterday. A bigger-than-expected price depreciation and lower sales in British Columbia are expected to pull down the national average, Klump added.