TORONTO (Reuters) - Pent-up demand and stronger economic conditions are expected to support housing starts over the next two years, Canada Mortgage and Housing Corp said on Wednesday in a forecast for new home construction and residential resales.
Saying Canadian housing markets have recovered since low points hit last year, the national housing agency said it expects housing starts of 182,000 units, up from 171,250 units in a previous view. Housing starts are expected to range between 166,900 to 199,600 units in 2010.
CMHC said it sees housing starts next year at 179,600 units, ranging between 148,600 to 208,800 units, compared with a 2011 forecast of 175,150 units last quarter.
There were 149,081 starts in 2009.
CMHC’s chief economist Bob Dugan also cited new government measures for the mortgage market, which took effect in April, that will help the long-term stability of Canada’s housing market.
The rule changes now require borrowers to have the resources to qualify for a five-year fixed-rate mortgage even if they decide on a lower-cost variable rate mortgage.
The government also lowered maximum amounts that can be withdrawn when borrowers refinance mortgages. A minimum down payment of 20 percent for insured mortgages tied to properties purchased as speculative housing investments not occupied by the owner is also now required.
Canada’s housing sector has been surprisingly resilient in the face of a global economic slowdown, partly encouraged by record low interest rates.
Recent housing starts data for April offered further evidence that the housing sector has been a leader in Canada’s economic recovery.
But an expected rise in interest rates soon and a healthier supply of homes for sale will eventually dampen activity.
“In late 2009 and early 2010, sales activity included some pent-up demand from early 2009. Once this demand is exhausted, and as mortgage rates gradually rise, the pace of activity in the resale market will ease,” the report said.
Dugan said the existing home market is likely to shift to more balanced conditions over the next two years, with sales in the range of 484,000 to 513,300 units in 2010.
It is then expected to ease the following year to be in the range of 443,500 to 504,900 units.
Earlier this week, home resales data showed a slower pace of sales in April while new listings climbed, suggesting Canada’s real estate market could soon start to cool after a year of surging activity.
Reporting by Ka Yan Ng; Editing by Theodore d'Afflisio