OTTAWA - Construction on new homes should hold steady for the rest of 2011 and into next year, as a robust housing market is expected to remain supported by strong employment and low mortgage rates, Canada Mortgage and Housing Corp. said Wednesday.
The agency forecasts that an average 183,200 units will be built in 2011, with about 183,900 new homes built next year.
"Housing starts have been strong in the last few months, but are forecast to moderate closer in line with demographic fundamentals," said Mathieu Laberge, deputy chief economist for CMHC.
"Despite recent financial uncertainty, factors such as employment, immigration and mortgage rates remain supportive of the Canadian housing sector."
Wednesday's prediction was an upward revision from its second-quarter outlook, which suggested 179,500 housing starts would go up this year, but revised next year's units lower from the 185,300 originally expected.
The new home market tends to follow trends in the resale market — with about a six-month lag — and the strong demand will help prop up the home building industry.
The revised forecast comes a week after the Canadian Real Estate Association, which tracks the sales of previously-owned homes, revised its forecast for national home resales up for the rest of the year, citing stronger than expected sales and higher prices in the second quarter.
CREA said sales should grow less than one per cent this year to 450,800, up from an earlier forecast that called for a one per cent dip in sales. Housing demand has been more robust than expected as interest rates remain low, enticing more buyers to take on mortgages at historically low carrying costs.
CMHC's prediction for sales of resale homes Wednesday was slightly lower, forecasting an average of 446,700 homes, essentially the same number as in 2010. In 2012, it believes sales will rise to 458,000 units.
Both organizations say an unexpected increase in sales of high-end homes, especially in the Vancouver area, pushed average prices higher than expected in the first half of the year and expect prices to moderate slightly for the rest of 2011.
Still, both predict that prices will end the year higher than in 2010. But as the existing home market moves into a more balanced territory as the number of new listings increases, growth in the average home price on CREA's multiple listing service is expected to be more modest in 2012, CMHC said.
Economists have said they expect home prices to fall between five and ten per cent as the real estate market cools off in 2012 once mortgage interest rates rise again.
But CMHC has revised average prices in the hot British Columbia real estate market higher for this year, due to a surge in the sale of multimillion dollar homes in the Vancouver area.