By Paul Vieira
OTTAWA--Canada Mortgage and Housing Corp. predicted on Thursday a decline in housing starts this year from 2023 due to high interest rates making some residential projects financially unfeasible.
The government agency, in its latest market outlook, also anticipates home prices to rise gradually and return to peak levels hit in 2022--prior to rapid-fire interest rate increases from the Bank of Canada--on the strength of lower mortgage rates, solid gains in population growth and after-tax income, and a shortage of housing supply. Existing-home sale activity should rebound in the second half of this year, on the expectation that the Bank of Canada begins cutting rates, CMHC said.
The outlook indicates that Canadian policymakers face immediate headwinds in efforts to ramp up housing construction in a bid to make real-estate more affordable for a younger cohort of Canadians. In the past two weeks, Canadian Prime Minister Justin Trudeau, who is struggling in public-opinion polls, has unveiled multibillion-dollar initiatives, among them a boost in loans available with less-strenuous terms, to spur the construction of housing units. Financial and polling data show younger Canadians are abandoning plans to buy a home.
CMHC has previously said the country needs 3.5 million new homes, above what's currently forecast for construction, to bring house prices down to what it considers affordable levels, or when shelter accounts for no more than 30% of pretax income. The vacancy rate in Canada hit a record low in 2023 of 1.5%.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
04-04-24 1143ET
