The Canada Mortgage and Housing Corporation released its 2018 Housing Market Outlook, and it looks like moderation is the name of the game for the next two years.
“Our key takeaway from this year’s outlook is moderation in Canada’s housing markets for 2019 into 2020. Housing starts are expected to decline from the higher levels we’ve seen recently,” explains Bob Dugan, Chef Economist, CMHC. “We expect resales in 2019 and 2020 to remain below recent peaks while prices should reach levels that are more in line with economic fundamentals such as income, job and populations growth.”
CMHC expects housing starts to drop to between 193,700 and 204,500 units in 2019. Both single-detached and multi-unit starts will fall slightly. National MLS sales are forecasted to come in around 478,400 to 497,400, while average MLS prices will range from $501,400 to $521,600 next year.
In Ontario, CMHC says market activity was “dampened” in 2018. Next year, we should see a “partial recovery” in sales and starts. Buyers will step off the sidelines due to stronger than expected job growth and immigration. That said, sales and starts may drop again by 2020.
Looking closer at Toronto, we can expect moderate sales growth and price growth in line with inflation. The high prices will lead to strong rental demand. One piece of good news is CMHC believes buyers will have more housing choices as supply is set to increase. The bad news – and not everyone will think this is bad news – is that most of the new supply will be high-rise condo units, so those on the hunt for a new single-family home will continue to struggle with tight inventory.
According to the HMO, the high cost of housing will continue to shift demand to relatively more affordable housing choices, meaning even stronger demand for condos. The buyers who are holding out for a single-family home may be convinced over the next couple years that the condo life can accommodate their needs.
If more buyers are shifting to high density housing, the new supply that CMHC is foreseeing may not be enough to meet the demand.