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CMHC 3rd Quarter Report, 2008

Posted On: 2008-08-21

Resale Markets Cool and New Building Starts Slow Down

An increase in homes for sale and fewer resale translations will move most resale markets in BC to balanced demand and supply conditions. Price growth will slow to a pace more in line with the general rate of inflation.

A well-supplied resale market will reduce the number of housing starts. High builidng material and land costs and declining affordability will reinforce the shift to denser housing types. Longer build times for complex projects will keep residential builders busy despite lower starts numbers.

The economic fundamentals behind BC's strong housing demand will moderate but remain positive. A growing population will partly offset the impact of slightly slower economic and employment growth on housing demand.

In-migration will expand the province's population faster than the national average and will support the demand for housing. BC is a prime destination for people from other countries and provinces. Low unemployment and good job prospects will attract more newcomers. Two-thirds of immigrants to BC will settle in Vancouver.

BC's economy will slow but still out-perform the national average. Weakness in the province's Forestry and Trade sectors, under the influence of developments south of the border, will continue. The domestic side of the economy will grow at a slower pace as consumers tighten their purse strings and investment in non-residential construction eases from recent high levels.

Labour market conditions will support housing demand. Unemployment will remain low, with wages rising, and job growth will be limited by the size of the labour force. BC's Index of Consumer Attitudes moved lower at mid-year, but the drop in confidence should stabilize and moderate declines in housing demand.

Both short and long-term interest rates are expected to remain within 25-50 basis points of their current levels in Canada and the US for the rest of the year, then edge higher in 2009. Canadian mortgage rates are expected to remain within 25-75 basis points of their current level this year and next. One and five-year mortgage rates are forecast to be in the 6.50-7.25 and 6.75-7.50 percent range respectively in 2008-09

*This information is an excerpt from the CMHC 3rd quarter report which can be viewed online at CMHC 3rd Quarter

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