TRENDS AT A GLANCE - CANADIAN REAL ESTATE MARKET -CMHC

Key factors and their effects on housing starts

Mortgage rates: Mortgage rates are expected to increase gradually and steadily, over the forecast horizon. However, they will remain low by historical standards. Current mortgage rates are supportive of housing demand.

Employment :The labour market has gotten off to a slower than expected start in 2013, with employment growing in the first six months at a little over half the rate in 2011 and 2012. Nevertheless, employment is expected to improve during the course of the year and is forecast to grow 1.4% in both 2013 and 2014, which will support Canada’s housing sector.

Income: Growth in incomes is expected to continue, albeit at a moderate pace, on account of modest economic growth in Canada and global markets. As a result, income growth will remain supportive of housing demand over the forecast horizon.

Net migration: Canada’s economy is expected to continue to perform well, relative to its peer countries. Canada should, therefore, continue to attract a high level of immigrants (net international migration) over the forecast horizon, which will support housing demand in the medium to long term.

Population:  Lower population growth among the 25 to 34 year age group is expected to lead to a slight moderation in demand from first-time home buyers this year and over the longer term. Furthermore, Canada’s low birth rate should lessen the demand for additional housing stock in the medium and longer term. Population aging, however, is likely to impact the type and tenure of housing demanded.

Resale market:  Resale market conditions for 2013 and 2014 are expected to be balanced in most local markets. Nevertheless, some price momentum will see the average MLS® price grow roughly in line with inflation in 2013 and 2014.

Vacancy rates:  The average vacancy rates of purpose-built rental apartments across Canada’s metropolitan centres is expected to decline slightly, to 2.5 per cent, in 2013 and remain at that level in 2014. Lower vacancy rates for purpose-built rental apartments over the forecast horizon are expected to help support multiple-unit housing construction, particularly in 2014, through the expansion of the rental condominium market.

Stock of new and unoccupied units: The stock of unabsorbed new housing units has been stable in the second quarter of 2013, indicating continued strength in demand for newly completed homes. In addition, the ratio of the stock of unabsorbed new units to population, a simple gauge to assess potential over-building is close to the historical average. Nevertheless, should the Inventory increase inordinately , builders may delay or reduce the size of some housing projects. This could lead to sharper - than -expected moderation.