When oil prices plummeted this year, so did the enthusiasm of many investors looking to cash in on the booming oil sands communities in Canada. Although the Canadian housing market was not hit as hard as the U.S. was, demand for new homes is down significantly and Canadian officials are not optimistic about the slowdown ending any time soon. To learn more about this, read the following article from Property Wire which looks at the housing environment in Canada, and why the market may be slow to recover.
Property development in Canada is unlikely to return to boom levels for at least four years, according to a federal housing agency.
Residential property starts will plummet to 141,900 in 2009 compared with 211,056 in 2008 and several years of plus 200,000 starts, says a report from the Canada Mortgage and Housing Corporation.
CMHC expects property starts to rise moderately to 150,300 next year but it doesn't see a return to the 200,000 level for at least four years. It predicts starts to be 162,650 in 2011, 163,450 in 2012 and 176,800 in 2013.
'As the economy picks up, so will starts. But given the short-lived nature of the housing market slowdown we do not expect a significant build-up of pent-up demand. Because of this, we do not expect housing starts to return to the 200,000-plus unit pace of recent years,' the report says.
But it also points out that Canada's housing market has not experienced the kind of collapse that has characterized the US market, which has seen starts fall to about a quarter of previous levels.
The CMHC said Canada's experience is more in line with an orderly decline from record levels, both in terms of starts, sales and prices.
The decline can be blamed on several factors including the current economic climate, increased competition from the existing home market and the impact of strong house price growth between 2002 and 2007, according to CMHC chief economist Bob Dugan.
'Housing market activity will begin to strengthen in 2010 as the Canadian economy recovers, bringing housing starts more in line with demographic fundamentals over the forecast period,' he said.
He also forecasts that property sales are expected to decline to 357,000 units from 433,990 last year and to start heading back up next year to 386,100.
The average price of resale homes is expected to fall to $283,100 this year and stabilize next year with the west of the country experiencing steeper prices falls as this is where prices rose the most.
Starts are expected to tumble 53 per cent in Alberta, 50 per cent in Saskatchewan, 42.5 per cent in British Columbia, compared to the national average of 32.8 per cent.
This article has been reposted from Property Wire. View the article on Property Wire's international real estate news website here.
