Kitchener Housing Starts to Decline in 2016, Stabilize in 2017
Toronto - Housing starts in the Kitchener-Cambridge-Waterloo (KCW) Census Metropolitan Area (CMA) will decline to 2,615 units in 2016 and then be relatively stable in 2017, according to the Canada Mortgage and Housing Corporation's (CMHC) Fall Housing Market Outlook report, released today. In addition, apartment starts will decline further from near record levels in 2014, while single-detached starts will trend higher.
Existing home sales are forecast to increase in 2016 and remain relatively unchanged in 2017. The resale market is expected to be balanced in KCW, with price growth above two per cent. The apartment vacancy rate is predicted to increase slightly in both 2015 and 2016, primarily due to an increase in the supply of rental housing.
"Housing starts will be trending down closer to the long-term rate of household formation next year. Rising employment will support housing demand. With prices higher and mortgage rates starting to edge up in late 2016, demand will stabilize in 2017," said Erica McLerie, CMHC Senior Market Analyst.
Ontario housing activity is expected to maintain its momentum in 2016 before easing in 2017, according to the Fourth Quarter 2015 CMHC Housing Market Outlook released today. Ontario housing starts are expected to range between 61,000 and 70,500 units in 2016 with a point forecast of 65,100. In 2017, starts are expected to range between 50,000 to 68,000 units with a point forecast of 59,900 units. If homeownership costs and inventories rise faster than expected, new home starts could be closer to the lower end of the forecast range.
Existing homes, being less expensive, will see strong MLS(R) sales ranging between 193,000 and 225,000 units in 2016 with a point forecast of 207,900 before easing and ranging between of 175,000 and 220,000 units in 2017 with a point forecast of 202,700 units. Ontario home prices are expected to grow at a slower rate over the forecast period.
"Despite improving economic performance, Ontario's housing market is expected to slow over the forecast period as the cost of owning a home continues to increase," said Ted Tsiakopoulos, CMHC Regional Economist. "However, some segments of the housing market will do better than others. Homes in south western and southern Ontario markets bordering the GTA tend to be more affordable, thus we expect a lot of activity in those centers as we do for high density housing which includes less expensive rental accommodation".
CMHC's fourth quarter 2015 Housing Market Outlook, Canada Edition(1), expects housing markets to moderate in 2015, 2016 and 2017.
"In 2015, increased housing market activity in provinces like Ontario and British Columbia - provinces that have benefitted from declining energy prices, a lower Canadian dollar and continued low mortgage rates - offset slowdowns in oil-producing provinces like Alberta," said Bob Dugan, CMHC Chief Economist. "We expect, however, that this counterbalancing effect will decrease over time. As such, housing starts and MLS(R) sales are projected to moderate in 2016 and 2017."
Another key factor in the moderation of starts is inventory management of multi-unit projects which typically have longer time horizon for construction than single-detached units. CMHC expects new home construction to slow down in the coming years as high levels of completed but unsold units will encourage some builders to channel demand for new housing towards existing inventory.
House price growth is expected to slow down as MLS(R) sales will favour moderately priced homes.
CMHC produces forecast ranges for resale and new home markets to account for risks and vulnerabilities that can affect the outlook for Canada and each province.
For 2015, housing starts are expected to range between 162,000 and 212,000 units in 2015, with a point forecast of 186,900 units. For 2016, housing starts are forecast to range from 153,000 units to 203,000 units, with a point forecast of 178,150 units. In 2017, we expect starts to range between 149,000 and 199,000 units, with a point forecast of 173,650 units.
MLS(R) sales are expected to range between 444,000 and 546,000 units in 2015, with a point forecast of 494,700 units. MLS(R) sales are forecast to range from 425,000 units to 534,000 units in 2016 and from 416,000 units to 536,000 units in 2017, with respective point forecasts of 479,500 and 476,000 units.
The average MLS(R) price is forecast to be between $417,000 and $459,000 in 2015, with a point forecast of $437,700. The average MLS(R) price is forecast to be between $420,000 and $466,000 in 2016 and between $424,000 and $475,000 in 2017, with respective point forecasts of $443,300 and $449,600. The point forecasts call for a 7.2 per cent gain in 2015, 1.3 per cent gain in 2016 and a further 1.4 per cent gain in 2017.
As Canada's authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need, and offers objective housing research and information to Canadian governments, consumers and the housing industry.