2010-2011 housing market outlook (Province of Québec)

QUÉBEC, May 19 /CNW Telbec/ - According to the latest forecasts conducted by Canada Mortgage and Housing Corporation (CMHC), a recovering economy, favourable borrowing conditions and strong migratory flows will fuel Quebec's housing markets this year and next. Sales of existing homes will surpass the 86,000 mark this year and more than 47,000 new homes will be started in the province.

"In the second half of 2009, the impact of improving global and national economic environments was already apparent in all sectors of Quebec's economy. In addition to public spending on infrastructure projects, 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," explained Kevin Hughes, Regional Economist at CMHC.

According to CMHC, the Quebec economy is forecast to grow by just over 2.6 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 ageing and the recent increase in the birth rate will likely prompt households to adjust their housing needs.

Single Starts:

Recently, starts of single detached homes have benefited significantly from the improved economic and financial environment as well as from the reduced supply of such homes on the resale market. However, the easing of the resale market combined with a trend toward more affordable housing will take pressure off of new construction going forward. About 19,700 single detached starts are expected in 2010 and 17,500 in 2011.

Multiple Starts:

A number of factors such as: the current high level of inventory, which will remain relatively high, the lower growth rate of the population aged 75 and over, which will limit demand for retirement homes, will dampen starts of multiple family homes in 2011. Nonetheless, given the strong pace at the outset of the year multiple starts will rise to 27,600 units in 2010, moving down to 24,000 in 2011.

MLS(R) sales :

Following a strong recovery in 2009 - which has extended into the first quarter of 2010, MLS(R) sales will moderate during the remainder of this year, as less favourable buying conditions emerge. Sales of existing condominiums (town houses or apartments) will again be an important component of the total. The Multiple Listing Service (MLS(R)) will record over 86,000 unit sales this year, while 2011 will see 83,000 unit sales.

Prices:

Decreasing demand for resale homes combined with rising supply will take pressure off prices in the course of the next two years. With a return to more balanced conditions, price growth in the resale market will moderate during 2010 and 2011 to a pace that is in line with inflation.

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. Looking ahead, we expect that short-term interest rates will begin to rise in the second half of 2010.

With the overnight rate expected to increase in the coming months, mortgage rates have begun to rise. 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 3.6-4.8 per cent range, while three and five-year posted mortgage rates are forecast to be in the 4.2-6.7 per cent range. For 2011, the one-year posted mortgage rate is assumed be in the 5.0-6.0 per cent range, while three and five-year posted mortgage rates are forecast to be in the 5.6-7.2 per cent range.

Rates could, however, increase at a faster pace if the economy recovers more quickly 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, visit www.cmhc.ca or call 1-800-668-2642.

    
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         CMHC Housing Market Forecasts: Province of Québec - Spring 2010
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                                    2004        2005        2006        2007
                               ----------  ----------  ----------  ----------

    Residential Construction(1)
      (Starts)

      Single Detached(1.1)        28,871      23,930      21,917      22,177
                                               -17.1        -8.4         1.2
      Multi-Family(1.2)           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(2)

      MLS(R) Sales                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(3)

      GDP Growth (%)                 2.7         1.8         1.7         2.8

      Employment Growth (%)          1.4         1.0         1.3         2.3

      Total Net Migration(3.1)    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(1)
      (Starts)

      Single Detached(1.1)        19,778      17,535      19,700      17,500
                                   -10.8       -11.3        12.3       -11.2
      Multi-Family(1.2)           28,123      25,868      27,600      24,000
                                     6.6        -8.0         6.7       -13.0
      Total                       47,901      43,403      47,300      41,500
                                    -1.3        -9.4         9.0       -12.3

    Resale Market(2)

      MLS(R) Sales                76,762      79,290      86,400      83,000
                                    -4.8         3.3         9.0        -3.9
      MLS(R) Average Price ($)   215,307     225,412     238,600     242,600
                                     3.7         4.7         5.9         1.7

    Other indicators(3)

      GDP Growth (%)                 1.0        -1.4         2.6         3.0

      Employment Growth (%)          0.8        -1.0         1.6         1.9

      Total Net Migration(3.1)    39,158      49,896      55,000      58,500
                                    19.8        27.4        10.2         6.4
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    (1) source and forecast: CMHC. (1.1) Dwelling for wich all walls are
    detached (1.2) Semi-detached, row or apartment units

    (2) source: Canadian real Estate Association, Multiple Listing
    Service (MLS(R)) historical data and forecasts based on information
    available up to April 23rd. 2010

    (3) sources: Statistics Canada, forecasts: CMHC. (3.1) sum of net
    international migration, net interprovincial migration and net non-
    permanent residents
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For further information: Province: Kevin Hughes, Senior Economist, [phone]; Montréal: Bertrand Recher, Senior Market Analyst, [phone]; Sherbrooke (Estrie): Francis Cortellino, Senior Market Analyst, [phone]; Gatineau (Outaouais, Abitibi): Patrice Tardif, Senior Market Analyst, [phone]; Trois-Rivières (Mauricie): Marie-Élaine Denis, Market Analyst, [phone]; Saguenay: Sébastien Paquet-Poirier, Market Analyst, [phone]; Québec: Élisabeth Koulouris, Senior Market Analyst, [phone]