CMHC FINANCIAL 1st QUARTER REPORT 2010 & FINANCIAL FORECAST
Mortgage Rate Outlook
- Mortgage rates fell over the course of 2009, but are now expected to remain relatively stable going forward. 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 3.7-4.3 per cent range, while three and five-year posted mortgage rates are forecast to be in the 4.4-6.0 per cent range. For 2011, the one-year posted mortgage rate is assumed be in the 4.7-5.4 per cent range, while three and five-year posted mortgage rates are forecast to be in the 5.1-6.7 per cent range.
- Ontario home starts will strengthen from 2009 levels reaching 60,700 units in 2010 and 56,550 units in 2011.
- Owing to economic uncertainty starts will range between 51,000 to 75,000 units over the next few years.
- Gradual economic recovery, improved credit market conditions, buoyant resale markets and declining new home inventories motivate stronger construction activity in the short run.
- Single detached home construction will lead starts higher in the short term.
- Rising mortgage carrying costs will shift demand from expensive to more inexpensive housing – boosting demand for row, apartment ownership and rental accommodation.
- Quarterly Ontario resale volumes will moderate from record levels but owing to economic uncertainty will range between 170,000 and 210,000 unit sales this year and next.
- Resale volumes in 2011 will be down from 2007 peak but in line with high volume years during latter part of past decade.
- The drag on sales from less pent-up demand and rising mortgage carrying costs will only partially be offset by stronger job markets.
- Higher Ontario prices will prompt more listings – dampening the growth in prices during the year and into 2011.
- Higher carrying costs will also prompt a shift to more inexpensive home types – dampening housing infl ation further.
- Ontario economic recovery will be led by domestic demand – GDP reaches potential growth of 3.3 per cent by 2011.
- High Canadian dollar & cautious US consumer spending will temper the province’s export sector recovery in the short run.
- Improving global economy, reduction of inventories will stabilize manufacturing activity.
- Net migration outfl ows to western Canada will continue, albeit at a slower rate, as western provinces lead the economic and housing recovery.
- Battered housing markets in Ontario’s industrial heartland which include Windsor, Oshawa and St. Catharine’s-Niagara urban areas will benefi t from stabilization of industrial activity, less out-migration and declining housing inventories.
- Residential construction will grow most in Ontario’s tightest markets which includes Barrie, Toronto, and Thunder Bay.
- Increasing demand for modestly priced ownership and rental housing will support high-density construction activity in expensive markets such as Toronto, Ottawa and Hamilton.
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