Canada’s federal housing agency now predicts work on new homes will increase this year and next, compared with an August call for declining starts, in another sign of unexpected strength in the real estate market.
Work will begin on 189,500 units in 2015, up from 189,000 this year, which would be an increase from 2013 levels, Canada Mortgage & Housing Corp. said in a quarterly forecast from Ottawa today. In August the agency predicted starts would fall this year and next from 2013.
Bank of Canada Senior Deputy Governor Carolyn Wilkins said yesterday in testimony to the Senate Banking Committee that although elevated household debt remains a risk, real-estate in Canada were probably headed for a “soft landing.” In September the central bank said in a statement the housing market had advanced faster than policy makers anticipated, and it dropped a reference to the constructive evolution of real estate.
Mortgage rates at historical lows are fueling a resurgence in the housing market, including for condos in Toronto and Vancouver. CMHC forecast in August starts would drop to 184,800 this year and further to 183,100 next year, from 187,923 in 2013.
“The trend for housing starts has been up in recent months, particularly in multi-unit structures,” CMHC chief economist Bob Dugan said in the report. “This has been broadly supported by key factors such as employment, disposable income and net migration, which are expected to continue to be supportive of the Canadian housing market over the 2014-2016 forecast horizon.”
Starts will fall in 2016 to 187,100 units as “builders focus on reducing their inventories,” Dugan said.
CMHC is working to reduce the impact on government finances of any downturn in the real-estate market, Chief Executive Officer Evan Siddall said in an Oct. 20 speech. While some parts of the market are definitely overvalued, in general Canadian housing is “robust,” Siddall said in Toronto. “We are not alarmed.”
This article originally appeared on BloomBerg.