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CMHC predicts immigration, jobs and low mortgage rates will fuel new home demand
Aug 22, 2013

 

Population increases and stable unemployment numbers, coupled with low mortgage rates, will spur builders to maintain new home production at 4,250 units this year and next in Winnipeg and the surrounding municipalities, according to a new report by Canada Mortgage and Housing Corporation (CMHC).
Total housing starts in the Winnipeg Census Metropolitan Area (CMA) finished 2012 with a 22 per cent increase over 2012, surpassing 4,000 units for the first time since 1988, according to CMHC’s Housing Market Outlook: Winnipeg CMA.
“In the first quarter of 2013, Winnipeg continued to post year-over-year job gains with 4,000 more people employed,” reported CMHC. “All of the growth has been in full-time positions, a factor that will help maintain housing demand moving forward.”
In 2012, the housing market in Winnipeg was buoyed by a job sector that recorded 8,600 more people employed in 2012, and increase of more than two per cent over the previous year.
“Demand for new homes is also being driven by population growth where, due in large part to international immigration, Winnipeg saw net migration of 10,176 persons in 2012. This contributed to an overall population increase of 1.6 per cent.”
While CMHC expects to see immigration growth slow this year with fewer international migrants, the projection is that the city’s population will still increase.
CMHC reported that the majority of new jobs were among those aged 45 to 64, which helped to fuel demand in the move-up market in the first quarter of 2013. 
Winnipeg continued to post year-over-year job gains with 4,000 more people employed.
Winnipeg home builders started construction on 2,129 single-detached dwellings in 2012, which was a 6.3 per cent increase over 2011.
“After a slow start in the first two months of 2013, the number of foundations poured in March helped push the first quarter total to 408 single-detached starts,” according to the outlook, “surpassing last year’s corresponding total by 3.6  per cent.”
CMHC is predicting that demand for new homes will be sustained over the balance of 2013, particularly in the move-up market as existing homeowners seek to take advantage of the increased value of their homes and be further encouraged by low mortgage rates.
In addition, the limited selection of existing homes is expected to maintain the pace of new home construction.
“Collectively, these factors are expected to maintain the pace of construction with builders starting 2,200 new single-family homes by year-end, an increase of 3.3 per cent over 2012.
“This will be followed by a further modest increase of 2.3 per cent in 2014,” according to CMHC.
The federal government agency reported that the land component of the new home market increased by 9.6 per cent year-over-year compared to only a four per cent increase for the actual house.
The land component of Statistics Canada’s New House Price Index  (NHPI) is expected to be less pronounced this year, as newly serviced lots are put on the market.
“The total average NHPI is expected to increase by four per cent in 2013, with a similar increase of 3.8 per cent in 2014. Expect the average single-detached price to increase 1.9 per cent in 2013 and 2.4 per cent in 2014, reaching $410,000 and $420,000, respectively,” according to the CMHC outlook.
The multiple-family component of the new home market has been on a tear this year. In July, Dianne Himbeault, CMHC’s senior market analyst for Winnipeg, said total housing starts were fueled by multiple-family construction. 
Developers are expected to respond to demand from younger people who have a higher propensity to rent or purchase condominiums than Baby Boomers.
CMHC reported that half the multiple-family starts this year are geared toward the rental market, due to the low vacancy rate spurring on demand.
The federal government agency predicts that “developers will continue to move ahead on projects currently in the planning stages and Winnipeg will see an elevated level of multi-family construction over the forecast period, with annual starts of 2,050 units in 2013 and 2,000 in 2014.” Last year, 1,936 multiple-family units were built.