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OTTAWA — Canada's housing market will remain steady this year and through 2013, with home prices expected to rise moderately, Canada Mortgage and Housing Corp. said Monday

"With the Canadian economy set to expand at a moderate pace and mortgage rates expected to remain low, activity levels in 2012 in both new home construction and sales of existing homes will stay close to levels seen in 2011," said CMHC deputy chief economist Mathieu Laberge.

Housing starts will total 190,000 units in 2012 and 193,800 units next year, according to the government agency.

Sales will amount to about 457,300 units this year 468,200 units in 2013, it said.

CMHC sees the average home price reaching $368,900 in 2012 and $379,000 the next year.

"The moderate increases in the average . . . price are consistent with the balanced market conditions that occurred in 2011, and that are expected to continue in 2012 and 2013," CMHC said.

With domestic mortgage and interest rates expected to remain near record lows for most of 2012, it’s still a good time to buy a house in British Columbia. First quarter results for 2012 show the province’s resale housing market is humming along with average results and prices forecast to remain relatively unchanged over the next 24 months.

“Modest economic growth at home and abroad is expected to limit growth in consumer demand both this year and in 2013,” said Cameron Muir, chief economist for British Columbia Real Estate Association (BCREA).

B.C. Multiple Listing Service (MLS) residential sales are forecast to increase 2.1% from 76,817 units in 2011 to 78,400 units this year, increasing a further 2.7% to 80,500 units in 2013. The 15-year average is 79,000 unit sales. A record 106,310 MLS residential sales were recorded in 2005.

“While European sovereign debt concerns and a sluggish United States economy will continue to impact consumer confidence, strong demand in the bond market is expected to keep mortgage interest rates at or near record lows for most of 2012,” added Muir.

Home prices in most B.C. markets are forecast to experience little change over the next 24 months as the supply of homes for sale more closely matches consumer demand.

The average MLS residential price in the province is forecast to edge down 2.2% to $548,500 this year and remain relatively unchanged in 2013, albeit increasing 0.8% to $553,000.

The Economist
Canada’s housing market
Look out below
After years of lecturing America about loose lending, Canada now must confront a bubble of its own
Feb 4th 2012 | TORONTO | from the print edition

IN FEW corners of the world would a car park squeezed between two arms of an elevated highway be seen as prime real estate. In Toronto, however, a 75-storey condominium is planned for such an awkward site, near the waterfront. The car park next door will become a pair of 70-storey towers too. In total, 173 sky-scrapers are being built in Toronto, the most in North America. New York is second with 96.
When the United States saw a vast housing bubble inflate and burst during the 2000s, many Canadians felt smug about the purported prudence of their financial and property markets. During the crash, Canadian house prices fell by just 8%, compared with more than 30% in America. They hit new record highs by 2010. “Canada was not a part of the problem,” Stephen Harper, the prime minister, boasted in 2010.
Today the consensus is growing on Bay Street, Toronto’s answer to Wall Street, that Mr Harper may have to eat his words. In response to America’s slow economic recovery and uncertainty in Europe, the Bank of Canada has kept interest rates at record lows. Five-year fixed-rate mortgages now charge interest of just 2.99%. In response, Canadians have sought ever-bigger loans for ever-costlier homes. The country’s house prices have doubled since 2002.
Speculators are pouring into the property markets in Toronto and Vancouver. “We have foreign investors who are purchasing two, three, four, five properties,” says Michael Thompson, who heads Toronto’s economic-development committee. Last month a modest Toronto home put on the market for C$380,000 ($381,500) sold for C$570,000, following a bidding war among 31 prospective buyers. According to Demographia, a consultancy, Vancouver’s ratio of home prices to incomes is the highest in the English-speaking world.

Bankers are becoming alarmed. Mark Carney, the governor of the central bank, has been warning for years that Canadians are consuming beyond their means. The bosses of banks with big mortgage businesses, including CIBC, Royal Bank of Canada and the Bank of Montreal, have all said the housing market is at or near its peak. Canada’s ratio of household debt to disposable income has risen by 40% in the past decade, recently surpassing America’s (see chart). And its ratio of house prices to income is now 30% above its historical average—less than, say, Ireland’s excesses (which reached 70%), but high enough to expect a drop. A recent report from Bank of America said Canada was “showing many of the signs of a classic bubble”.
The consequences of such a bubble bursting are hard to predict. On the one hand, high demand for Canada’s commodity exports could cushion the blow from a housing bust. And since banks have recourse to all of a borrower’s assets, and Canadian lending standards are stricter than America’s were, a decline in house prices would probably not wreck the banks as it did in the United States.
However, the Canadian economy is still dependent on the consumer. Fears about the global economy have slowed business investment, and all levels of government are bent on austerity. The Conservative government’s next budget is expected to put forward a plan to close the federal deficit, now 2% of GDP, by 2015—modest austerity compared to Europe’s, but still a drag on the economy. Few new jobs are being created. Assuming there is no setback in Europe’s debt crunch, slowdown in America or drop in commodity prices, GDP is forecast to grow by a meagre 2% this year. If consumers start feeling less well off, Canada could slip back into recession.
Explore and compare global housing data over time with our interactive house-price tool <http://www.economist.com/houseprices>
The inevitable landing will probably be soft. Increases in house prices and sales volumes are slowing, and the 2015 Pan American Games in Toronto should prop up builders. “The national housing market is more like a balloon than a bubble,” says a report by the Bank of Montreal. “While bubbles always burst, a balloon often deflates slowly in the absence of a ‘pin’.”
Moreover, the government is trying to cool the market. The banking regulator is increasing its scrutiny of housing in response to concerns about speculators. The Canada Mortgage and Housing Corporation, a government mortgage-insurance agency, says it will have to start reducing its new coverage because of legal limits. And the finance ministry has cut the maximum term of publicly insured mortgages from 35 years to 30. Some bank managers are calling for it to be reduced to 25, the historical norm. Canada’s reputation for financial sobriety is not entirely unwarranted.
However, the state has refused to use its most powerful tool. To protect business investment, the central bank has made clear that it plans to keep interest rates low. As long as money stays cheap, the balloon could get bigger—perhaps big enough to become a fully fledged bubble after all.

The small Osoyoos Indian Band in B.C.’s Okanagan has already earned the distinction of owning the most businesses per capita of any first nation in Canada. On Monday, Chief Clarence Louie’s bid for the province’s next maximum-security prison beat three others, adding a $200-million prize to his community’s development.

The 360-cell corrections facility, which promises 1,000-person-years of construction employment and the equivalent of 240 full-time permanent jobs, will be built at the band’s new industrial park, seven kilometres north of the town of Oliver.

Canadians have been confronted in recent months by images of the impoverished living conditions on the Attawapiskat reserve in northern Ontario – which received humanitarian aid in December. But in the real-estate rich Okanagan, Mr. Louie’s Osoyoos band has become a major economic force, creating jobs and revenue – both on reserve and for the larger community.

Since Mr. Louie formed the Osoyoos Indian Band Development Corp. in the late 1980s, the 500-member band has opened a golf course, a cultural centre, a gas station and store, a construction company, a cement plant, a vineyard and a luxury resort and spa. Mr. Louie is the CEO of the development corporation.

The band continues to branch out, with a $9-million investment in the creation of an industrial park. The new prison promised Monday by Premier Christy Clark will be the park’s anchor tenant.

“They are an absolutely sterling partner for this project,” Ms. Clark said Monday. It is the first partnership of its kind between the province and a first nations community, and the fact that the Osoyoos could offer a fully serviced site was a deciding factor over the other three Okanagan communities that had sought to play host to the new prison.

Not every community embraced the project – the city of Penticton had to withdraw its bid in response to a public backlash. Mr. Louie said his own people are not uniformly enthusiastic, but a vote to rezone the Senkulmen Enterprise Park to allow for a corrections facility won strong support.

“Here in the Okanagan, on the reserve or off the reserve, jobs are the number one issue,” he said in an interview. In addition to the immediate construction jobs, he says young people in his community need to start thinking about a career in corrections – not only as guards but in the fields of medicine and social work.

Mr. Louie said he was also driven to land this project by a social imperative to take on the imbalance inside Canadian prisons. After a tour of prisons in Western Canada, he saw firsthand the over-representation of first nations people inside prisons, and a need to improve rehabilitation services.

One in 20 British Columbians is aboriginal – but in B.C. prisons, the ratio is one in four.

“We would hope that this project, being the first of its kind on an Indian reserve, that we can work out and change the statistics of aboriginal incarceration in this country,” he said, “and that we can show to the rest of Canada how to work for the rehabilitation of not just the first nation inmates, but also all of the inmates that wind up in corrections.”

The facility will be built as a private-public partnership but the prison will be managed by B.C. Corrections. The band and the province will now spend the next six months working out the details. It is tentatively set to open in 2016.

Darryl Walker, president of the union that represents corrections workers, said the prison will go a long way to relieving dangerous overcrowding. But he worries that the province has taken far too long to get shovels in the ground. B.C. prisons are running at roughly 160 per cent capacity. Since 2008, about 175 inmates at any given time are being housed in large tents as an interim measure.

“Call them what you want, they are not secure facilities,” Mr. Walker said. “It’s not good enough.”

The new year got off to a good start for home builders in Kelowna and Vernon.

Canada Mortgage and Housing Corporation (CMHC) reports 49 new homes were being built in January 2012,  compared to 33 homes the same month in 2011.

Both detached home and multi-family starts were up from a year ago but single detached homes remained the focus of new home construction in January.

“Lower construction costs and lot prices have enabled builders to better compete with the existing home market and attract price sensitive buyers,” says CMHC Market Analyst Paul Fabri.

Multi-family starts in January included semi-detached units and townhouses.

“Builders continue to favour smaller housing projects rather than larger apartment condominium projects.”

Vernon housing starts also moved higher compared to January 2011 levels. Both Kamloops and Penticton recorded fewer housing starts in January 2012 than in the previous year.

As Canada's national housing agency, CMHC provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.

For more information, visit their website or call 1-800-668-2642

Home Sales Increase Last Year

Vancouver, BC ˆ January 13, 2012. The British Columbia Real Estate Association (BCREA) reports that the dollar volume of homes sold through Multiple Listing Service® (MLS®) in BC climbed 14.3 per cent to $43.1 billion in 2011. A total of 76,817 homes were sold in BC in 2011, up 2.9 per cent from 2010. The average annual MLS® residential price climbed 11.1 per cent to $561,026 over the same period.

"Low mortgage interest rates and gradually improving economic conditions contributed to a moderate increase in consumer demand last year," said Cameron Muir, BCREA Chief Economist. "BC home sales came in about on par with their 15-year average, but fell well below their ten-year average of over 88,000 units."

Vancouver, the Fraser Valley and the North experienced the largest percentage increase in unit sales last year, while consumer demand edged lower in Victoria and on Vancouver Island.

BC residential unit sales in December dipped 1.7 per cent to 4,186 units, while the average MLS® residential price was 2.8 per cent lower than in December 2010.