Starts to Stay Above 200,000 through 2006

Residential construction will moderate from 2004's 17-year high of 233,431 units to reach 216,300 starts this year, according to Canada Mortgage and Housing Corporation's (CMHC) first quarter Housing Market Outlook, Canada Edition report. Residential construction will continue to ease in 2006 with national housing starts dipping 7.0 per cent to 201,100 units.

"The housing market is set to slow in the months ahead as the demand for home ownership begins to ease toward more sustainable levels," said Bob Dugan, Chief Economist at CMHC. "Interest rates are forecast to nudge higher in both 2005 and 2006 and house prices will continue to rise. As a result, mortgage carrying costs will rise which will temper demand for home ownership."

Existing home sales, as measured by the Multiple Listing Service (MLS(R)), are forecast to decrease 2.4 per cent to 445,100 units this year.
With prices up by about 30 per cent in the last three years and mortgage rates forecast to inch higher, existing home sales will decrease in 2005 and 2006. Fewer sales and an increase in the number of new listings will ease price pressures in the existing home market. MLS(R) prices, which increased by 9.7 per cent in 2004, will rise at a more modest pace as the resale markets in most metropolitan centres move toward a balanced state. The average price will increase by 5.8 per cent in 2005 and 3.4 per cent in 2006.

Ontario home starts, at 85,114 units in 2004, ended the year just short of a 15-year record. Construction will be high, but edge lower over the next
couple of years as mortgage rates inch up and the growing number of listings offer home buyers more choice. Starts in 2005 will reach 80,500 units, their third highest level in 15 years and edge lower in 2006 to 75,000 units, closer to the province's demographically driven level of demand.