Canada Mortgage and Housing Corporation

Canada Mortgage and Housing Corporation

November 18, 2014 11:30 ET

CMHC Housing Outlook Conference

QUEBEC CITY, QUEBEC--(Marketwired - Nov. 18, 2014) - Canada Mortgage and Housing Corporation (CMHC) presented its annual Housing Outlook Conference today to an audience of about 500 industry professionals. Under the theme "Targeting the essentials," the speakers addressed the state of the real estate market across the province and in the Québec census metropolitan area (CMA) and also provided an overview of what will shape tomorrow's market.

Provincial Outlook

"A gradual recovery in Quebec's economic growth over the next two years will stimulate housing demand, to a similar extent, in 2015 and 2016. During that period, resale market conditions will tighten slightly, which will contribute to supporting housing starts. However, even with demand edging up, a significant supply will keep the growth in prices at a modest pace," said Kevin Hughes, CMHC's Senior Economist for Quebec.

At the provincial level, total housing starts in Quebec will reach 38,200 units in 2014, 39,000 units in 2015 and then 40,100 units in 2016. Following a new rise in resales next year (to 72,600 units, from 70,900 this year), 73,400 Centris® sales will be registered in 2016, thanks to more robust job markets. Prices for existing homes will post gains of less than 2 per cent over the next two years.

According to Kevin Hughes, "very soon, the aging of the population will have significant impacts on housing supply and demand among households aged 75 or older, a population segment that is about to start growing faster."

Regional Outlook - Québec CMA

After remaining practically stable for two years, employment in the CMA will post small gains until 2016. This trend on the job market will modestly support housing demand. The Québec area will still maintain its appeal, and migration will hold steady, which will fuel demand on the rental housing market.

Next year, Centris® sales are expected to increase by 3 per cent, compared to 2014, for a total of 6,650 transactions. In 2016, the growth will continue, and total transactions will rise to 6,900 units, for an increase of 4 per cent. These levels will still remain below the average of the last five years (7,170 units). Even though market conditions will tighten, they will remain soft, which will limit the growth in prices. The average Centris® price of residential properties will rise by 1 per cent in 2014 and then by 2.0 per cent a year, reaching $280,000 in 2016.

As a result of more choice on the resale market, among other things, housing starts are bound to slow down from now until 2016. Single-detached home starts will decrease over the coming years. From 961 units in 2013, such starts will fall to 925 units this year, to 850 next year and finally to 800 in 2016. The decline will be due to several factors, including their relatively high prices and the greater choice among existing housing types.

Just like single-detached home production, the construction of multi-unit housing(1) will also be on a downward trend until 2016. Overall, multi-unit housing starts will fall by 14 per cent this year, by 13 per cent in 2015 and by 11 per cent in 2016. This year, the decline in multi-unit housing starts will be mainly due to a drop of nearly 40 per cent in the condominium segment. The total number of new condominiums will reach 900 units this year and then stabilize at that level until 2016. The major decreases will be a thing of the past, but activity will be low in comparison with recent years. In fact, even though condominium production has been declining significantly since 2013, the inventory on the resale market will remain considerable.

Rental housing starts, for their part, will reach the same level this year as in 2013, with 1,600 units. The production of rental units will then slow down in 2015 and 2016, on account of the increases in the vacancy rate(2) anticipated for this year and next year. Rental housing starts will reach 1,200 units in 2015 and then fall to 900 units in 2016.

Overall, total housing starts will reach 4,125 units this year (-12 per cent) and 3,650 in 2015 (-12 per cent). And, the year 2016 will see the lowest level of starts of this type since 2002, with 3,300 units, for a decrease of 10 per cent year over year.

(1) Semi-detached and row homes, duplexes, rental dwellings and condominiums.
(2) Conventional rental market.

Québec and Its Sectors: Market Mapping - Québec CMA

In recent years, urban sprawl and residential intensification trends have taken shape simultaneously. Many new multi-unit housing projects have been added in the Québec area, particularly near the employment hubs. At the same time, the single-detached home market has expanded, especially in the Northern Suburbs.

In 2014, even though Centris® sales of single-family houses in the CMA have been stable, certain sectors saw their transaction levels fluctuate. The South Shore East, Charlesbourg and Val-Bélair-L'Ancienne-Lorette sectors registered increases in sales this year. However, significant decreases were observed in the South Shore Centre, Beauport and Jacques-Cartier sectors.

On the supply side, the upward trend in Centris® listings was apparent everywhere with the exception of Val-Bélair-L'Ancienne-Lorette. This has caused market conditions to ease in 2014 and has limited the price increases. Despite this easing, several sectors, such as Val-Bélair-L'Ancienne-Lorette and Les Rivières, still posted relatively tight conditions and remained favourable to sellers, for single-detached houses as well as semi-detached and row homes. In the future, demand should hold up in the Québec Agglomeration, thanks in part to the proximity of the employment hubs.

On the condominium market, Les Rivières and the South Shore stood out with increases in sales, while significant decreases were recorded in the Basse-Ville and Beauport. In the end, market conditions eased, with buyers still favoured everywhere across the CMA. However, certain sectors could see market conditions become balanced again by 2016.

On the new home market, the decrease in activity more significantly affected the Québec Agglomeration, on account of the decline in condominium starts. Semi-detached and row home construction was up everywhere across the CMA, while only the Québec Agglomeration posted a gain in starts of single-detached houses. This year, Beauport was the sector with the highest level of starts in the CMA. The South Shore also stood out thanks to the start of construction on several large rental housing projects. The anticipated decrease in single-detached home construction will more significantly affect the Northern Suburbs, as that is where the majority of such homes are built. Lastly, all sectors of the Québec CMA should see their levels of condominium starts stay relatively low. Even the sectors with the tightest resale market conditions, such as Les Rivières and Saint-Augustin, have inventories of new units to be absorbed. So, even in these sectors, there will be a lower level of activity than in recent years.

As Canada's national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.

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