Local housing starts to fall in 2014, CMHC says

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While the number of housing starts in Ottawa is forecast to decline this year, the resale market is expected to stay balanced into 2015, according to a new report by the Canada Mortgage and Housing Corporation.

By Jacob Serebrin

“Neither the buyer or the seller will have the upper hand,” Sandra Pérez Torres, CMHC's senior market analyst for the Ottawa region, said in an interview with OBJ.

According to Ms. Pérez Torres, prices are also likely to stay relatively stable, rising at the rate of inflation.

The number of overall housing starts is expected to decline by 23.5 per cent, from 6,560 to 5,020, during 2014, according to the CMHC’s spring Housing Market Outlook, released on Thursday.

That’s “mostly a result of a decline in apartment construction,” Ms. Pérez Torres said.

The CMHC is forecasting that number of new apartment unit starts – including both rentals and condos – will fall from 4,773 in 2013 to 3,370 in 2014, a 29.4 per cent drop.

At the moment, the condo supply in Ottawa is growing faster than demand, Ms. Pérez Torres said. However, with baby boomers looking to downsize, “the demand is there,” she said, but “it will take a little bit of time.”

The number of single-detached starts is also expected to decline, from 1,787 to 1,650, a decrease of 7.7 per cent.

“The inventory of homes in Ottawa that are completed that have not been sold is increasing,” she said, causing some builders to moderate.

But with more business confidence in the region, the CMHC is forecasting an uptick in the number of housing starts in Ottawa in 2015, though they won’t reach 2013 levels.

The large number of condos is also expected to impact the rental market, increasing the vacancy rate from 2.9 to 3.2 per cent.

“23 per cent of these condos are bought by investors and they’re renting them out,” said Ms. Pérez Torres. “So they’re competing with purpose-built” rental apartments.

Row houses are expected to remain popular.

“It’s a question of affordability,” Ms. Pérez Torres said. “Semi-detached and rows provide more space for families than an apartment.”

She said these dwellings are particularly popular with first-time homebuyers and immigrant families.

However, there is a lot of uncertainty, Ms. Pérez Torres said, warning that if the condo supply isn’t absorbed, it could push starts down further.

There is also the “risk that interest rates could increase higher than expected,” she said.