Quebec housing starts forecast

MONTREAL, March 2 /CNW Telbec/ - According to the latest forecasts conducted by Canada Mortgage and Housing Corporation (CMHC), sales of existing homes will stay above the 80,000 mark this year and more than 43,000 new homes will be started in the province. "A recovering economy, favourable borrowing conditions and strong migratory flows will fuel Quebec's housing markets this year and next", said Bertrand Recher, Senior Market Analyst at CMHC.

In the latter stages of 2009, the impact of improving global and national economic environments was apparent in Quebec's economy. Both household spending and private investment started to grow again, while exports reacted positively to increased global demand. Whereas a share of the growth in 2010 will stem from various fiscal measures, 2011 will see the private sector contributing to provincial growth.

Given this context, the Quebec economy is forecast to grow by just over 2.1 per cent in 2010 and by 3.0 per cent in 2011.

A variety of demographic factors will also sustain the province's housing markets in the coming years. Growing net migration to the province will continue to have a positive impact on the rental and resale markets. In addition, population aging and the recently higher birth rate will likely prompt households to adjust their housing needs.

In Detail

Single Starts: Starts of single detached homes will benefit from the improved economic and financial environment and from the reduced supply on the resale market. However, a portion of the rising demand will be diverted to less expensive alternatives such as existing homes and multiple family dwellings (semi-detached houses and town homes). About 18,350 single detached starts are expected in 2010 and 17,350 in 2011.

Multiple Starts: Activity in this market segment will be curbed by two factors: the current level of supply, which will remain relatively high, and by the lower growth rate of the population aged 75 and over, which will limit demand for retirement homes. Accordingly, it is expected that multiple starts will drop to 25,500 units in 2010 and to 24,300 in 2011.

Resales: Following a strong recovery in 2009, MLS(R) sales will moderate during the course of 2010 from the record level established in the fourth quarter of 2009. Sales of existing condominiums (town houses or apartments) will again be an important component of the total. This year, Multiple Listing Service (MLS(R)) will record 81,250 unit sales, while 2011 will see 80,000 units sales.

Prices: Decreasing but high existing home sales activity and a limited supply of listings will continue to exert some upward pressure on prices in Quebec's resale market. Growth in the resale market will, nevertheless, moderate due to less tight market conditions. MLS(R) price growth is forecast to be 3.8 per cent in 2010 and 2.6 per cent in 2011.

Mortgage Rates

The Bank of Canada cut the Target for the Overnight Rate in the early months of 2009. The rate was 1.50 per cent at the start of 2009 and has since fallen to 0.25 per cent. The Bank has committed to keeping this rate at 0.25 per cent through the middle of 2010 unless inflationary pressures warrant an increase.

Mortgage rates fell over the course of 2009, but are now expected to remain relatively stable going forward. According to CMHC's base case scenario, posted mortgage rates will gradually increase throughout the course of 2010, but will do so at a slow pace. For 2010, the one-year posted mortgage rate is assumed to be in the 3.7-4.3 per cent range, while three and five-year posted mortgage rates are forecast to be in the 4.4-6.0 per cent range. For 2011, the one year posted mortgage rate is assumed be in the 4.7-5.4 per cent range, while three and five-year posted mortgage rates are forecast to be in the 5.1-6.7 per cent range.

Rates could, however, increase at a faster clip if the economy recovers at a stronger pace than presently anticipated. Conversely, rate increases could be more muted if the economic recovery is more modest in nature.

As Canada's national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable homes. 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 vital decisions. For more information, call 1-800-668-2642.

    
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         CMHC Housing Market Forecasts: Province of Québec - Winter 2010
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                                    2004        2005        2006        2007
                              ----------  ----------  ----------  ----------
    Residential Construction
      (Starts)

      Single Detached(1)          28,871      23,930      21,917      22,177
                                               -17.1        -8.4         1.2

      Multi-Family(2)             29,577      26,980      25,960      26,376
                                                -8.8        -3.8         1.6

      Total                       58,448      50,910      47,877      48,553
                                               -12.9        -6.0         1.4

    Resale Market

      MLS(R) Sales(3)             68,268      70,385      71,622      80,649
                                                 3.1         1.8        12.6

      MLS(R) Average Price ($)   171,774     184,492     195,171     207,530
                                                 7.4         5.8         6.3

    Other indicators

      GDP Growth (%)                 2.7         1.8         1.7         2.8

      Employment Growth (%)          1.4         1.0         1.3         2.3

      Total Net Migration(4)      36,189      29,035      28,118      32,698
                                               -19.8        -3.2        16.3

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                                    2008        2009      2010(f)     2011(f)
                              ----------  ----------  ----------  ----------
    Residential Construction
      (Starts)

      Single Detached(1)          19,778      17,535      18,350      17,350
                                   -10.8       -11.3         4.6        -5.4

      Multi-Family(2)             28,123      25,868      25,500      24,300
                                     6.6        -8.0        -1.4        -4.7

      Total                       47,901      43,403      43,850      41,650
                                    -1.3        -9.4         1.0        -5.0

    Resale Market

      MLS(R) Sales(3)             76,762      79,290      81,250      80,000
                                    -4.8         3.3         2.5        -1.5

      MLS(R) Average Price ($)   215,307     225,412     233,900     240,000
                                     3.7         4.7         3.8         2.6

    Other indicators

      GDP Growth (%)                 1.0        -2.0         2.1         3.0

      Employment Growth (%)          0.8        -1.0         0.9         1.8

      Total Net Migration(4)      39,158      48,051      49,500      50,500
                                    19.8        22.7         3.0         2.0

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    Notes:
    (1) Dwelling for wich all walls are detached
    (2) Semi-detached, row or apartment units
    (3) Multiple Listing Service (MLS(R))
    (4) Sum of net international migration, net interprovincial migration and
        net non-permanent residents
    Sources: Canadian Real Estate Association, Statistics Canada, CMHC;
             (f) CMHC forecasts
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For further information: Province: Bertrand Recher, Senior Market Analyst, [phone]; Montréal: Bertrand Recher, Senior Market Analyst, [phone]; Québec: Élisabeth Koulouris, Senior Market Analyst, [phone]; Gatineau (Outaouais): Patrice tardif, Senior Market Analyst, [phone]; Sherbrooke (Estrie): Francis Cortellino, Senior Market Analyst, [phone]; Trois-Rivières (Mauricie): Marie-Élaine Denis, Market Analyst, [phone]; Saguenay: Sébastien Paquet-Poirier, Market Analyst, [phone]