House prices are expected to continue to rise this year and next, says Canada Mortgage and Housing Corp.
The average selling price of existing homes changing hands will rise by 2.1 per cent in 2014, then slow to an increase of 1.7 per cent next year, CMHC said on Thursday in its first quarter housing outlook.
The 2.1 per cent gain this year is anticipated to result in an average house price of $390,400 and the 1.7 per cent hike in an average price of $397,100 in 2015, according the the Crown corporation.
The number of housing starts this year and next is expected to stabilize in a climate of rising mortgage rates and cooling demand from first-time buyers, says CMHC.
Residential construction starts are expected to range between 176,600 and 199,800 units in 2014.
CMHC has a point forecast for 2014 of 187,300 units, almost unchanged from 187,923 units last year.
Next year, starts are anticipated to be in the 163,200 to 206,600 range, with a point forecast of 184,900 units.
Sales of existing homes are projected to come in between 436,000 and 497,000 this year, and 443,400 to 506,000 units in 2015.
The point forecast for 2014 sales is 466,500 units, up from 457,485 in 2013.
For 2015, the point forecast is for sales of 474,700.
The average price is forecast to be between $380,100 and $400,700 in 2014, and $384,300 to $409,900 next year.
“Support from improved economic and demographic fundamentals will be tempered by a combination of a modest and gradual increase in mortgage rates and a slowdown in demand from first-time buyers,” the agency said.
“With a relatively high number of units currently under construction, we expect builders will gradually adjust their activity in order to reduce their level of inventory,” said Mathieu Laberge, CMHC deputy chief economist.
“Housing demand for resale market homes will continue to be sustained despite expected modest and gradual increases in mortgage rates toward the end of the forecast horizon,” he said.