Canada Mortgage and Housing Corporation

Canada Mortgage and Housing Corporation

August 14, 2006 12:37 ET

BC Housing Expansion Reaches Record

VICTORIA, BRITISH COLUMBIA--(CCNMatthews - Aug. 14, 2006) - Builders in British Columbia will start 37,000 homes in 2006, the highest level of new home construction in eleven years and the sixth consecutive year of growth in housing starts, according to the Housing Market Outlook: National Edition released today by Canada Mortgage and Housing Corporation (CMHC).

"This year also represents the likely peak in the current housing cycle as rising mortgage rates and higher home prices work to slow demand," noted Carol Frketich, CMHC's BC regional economist. In 2007, 34,900 new homes will start, about 5.7 per cent fewer than in 2006. "Both new home construction and resale activity will slow in 2007, but the level of activity will remain higher than average," added Frketich.

"We're already seeing the impact of rising mortgage rates and higher home prices on resale market activity in British Columbia, with sales slowing in the second quarter," said Frketich. An expanding economy, growth in employment and incomes, as well as high levels of consumer confidence continue to support housing demand and exert upward pressure on home prices. However, growth in house prices has exceeded underlying income growth for four years now. With the average resale price forecast to increase 17.7 per cent in 2006 compared to income growth in the 5-6 per cent range, eroding affordability may temper housing demand.

CMHC's analysis of housing market conditions points to more balanced market conditions in 2007, with the average resale price increase of 6.9 per cent. Increased listings in some markets will provide more choice for buyers. Continued high levels of new home construction will add to the housing supply next year although inventories of completed and unoccupied units will remain low due to pre-sale activity.

With about seven per cent of the province's housing stock changing hands each year, renovation spending has been growing. In 2005, British Columbians spent $5.1 billion on new floors, kitchens, bathrooms, roofs and other home improvements, repairs and maintenance. The popularity of new fixtures and renovation products, as well as the aging housing stock, will fuel spending on alterations and improvements. Renovation spending is forecast to reach $6.0 billion next year.

Report Highlights:

- Resale market activity slowing but upward price pressure continues

- Housing starts activity to peak in 2006

- Single-detached construction picks up in 2006 after a decline in 2005

- Renovation spending to reach $6.0 billion in 2007

Canada Mortgage and Housing Corporation (CMHC) has been Canada's national housing agency for more than 60 years. CMHC is committed to helping Canadians access a wide choice of quality, affordable homes, and making vibrant and healthy communities and cities a reality across the country. For more information, visit www.cmhc.ca or call 1 800 668-2642.

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