Canada Mortgage and Housing Corporation (CMHC) has recently released its Housing Market Outlook for fourth quarter 2014. The report looks ahead to 2015 and 2016, predicting growth in housing starts and resales next year as economic conditions improve, with a slight decline the following year as mortgage rates potentially increase.
CMHC makes the following predictions on interest rates:
CMHC expects interest rates to remain unchanged until the latter parts of 2015 and then begin to increase gradually. Gradual increases in mortgage rates from historic lows are not expected to significantly impact housing demand.
Here’s a look at its interest rate predictions for the next two years*:
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| 2014 | 3-3.25% | 5-5.5% | |||
| 2015 | 3.20-4% | 5.25-6% | |||
| 2016 | 3.70-4.60% | 5.55-6.45% | |||
*We suspect these are posted rates, not actual rates. Very few consumers actually get posted rates.
Growth in existing home sales in Alberta and British Columbia will potentially push the average number of MLS transactions, as well as the average home cost, slightly higher in the coming years.
CMHC expects MLS home prices to rise across Canada and in British Columbia (this is for the entire province; housing costs are often higher in the Vancouver area):
| Year | Nationwide | British Columbia |
| 2014 | $401,600-$405,400 | $564,200 |
| 2015 | $403,600-$417,800 | $566,300 |
| 2016 | $407,300-$24,500 | $573,000 |
Thanks to increased Canada-Asia Pacific trade and an expected pickup in employment growth (employment across Canada is expected to increase by 0.8 per cent in 2014, 1.5 per cent in 2015 and 1.9 per cent in 2016), British Columbians can look forward to economic growth, reports CMHC. Demand for housing across British Columbia will increase with Canadians migrating from other provinces. In fact, CMHC predicts that B.C. will add around 30,000 new households annually. (Contrast that to Alberta, which is expected to see a decline in net migration and a decrease in housing starts.)
Single-detached home starts are expected to increase fuelled by demand in the province’s urban centres outside of the Lower Mainland. Multi-unit starts across B.C. are expected to remain stable, as single-person households lead to demand for smaller, lower-priced housing options. Some demand for resale homes may shift to new homes as the gap between new and existing home prices declines.
