Thursday, May 22, 2008

CMHC reports on economic outlook

At a glance:
Mortgage Rates
Employment
Income
Net Migration
Natural Population
Increase
Consumer Confidence
Resale Market
Vacancy Rates



Mortgage rates have moved slightly higher over the past year. This rise, in conjunction
with higher house prices, has and will continue to push mortgage carrying costs higher.

As a result, this will ease housing demand, particularly for first-time buyers.

A record share of Canadians continue to be employed, moving the economy close to
full-employment. Accordingly, job growth should slow to rates that are more in line
with overall population growth. Job creation will continue to stimulate housing
demand, but not as much as in the previous years.

Rising incomes will continue because of tight labour markets and a strong demand for
workers. This should partially offset the negative impact of higher mortgage carrying
costs on home ownership demand.

Net migration is expected to remain strong in 2008. Ontario, Quebec, and British
Columbia will continue to attract the bulk of the international immigrants. B.C.,
Alberta and Saskatchewan will attract a large number of inter-provincial migrants from
the rest of Canada.

Canada's population is aging, and as a result, a smaller proportion of people are in
their child bearing years and thus the birth rate is decreasing. High immigration levels
will slow the average aging of the population, however, the rate of increase in the
natural population (births - deaths) is slowing. This will eventually lessen the demand
for additional housing stock in the longer term.

Consumer confidence, as measured by the Conference Board of Canada, remains
positive. Furthermore, strong consumer sentiment is expected to prevail throughout
the forecast period. Confident consumers will continue to support demand for home
ownership.

Lower existing home sales, combined with a high level of new listings in 2008, will
move the resale market towards more balanced territory. As a result, the rate of
growth in the average MLS® price will moderate during 2008, especially in Canada's
western provinces.

Modest rental construction and increased competition from the condo market will be
offset by strong rental demand due to high immigration and a rising gap between the
cost of homeownership and renting. As a result, vacancy rates across Canada's
metropolitan centres should remain relatively stable, but slightly higher in 2008.



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A. Mark Argentino
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