Wednesday, November 17, 2010

CMHC Forecast for 2011

The annual CMHC forecast for the Ottawa housing market came out yesterday.  Sandra Pérez-Torres did her insightful presentation predicting the future of the local marketplace.  I have had the pleasure of meeting Ms Perez-Torres in the past and she definitely does her research and understands the marketplace. 

I am in line with her thinking, I find the below summary to be a very well researched prediction of what the coming year will have in store for local investors.

No boom, no bust, no bubble — Ottawa’s housing sector in 2011 is expected to be a model of stability.
For builders and buyers, investors and sellers, that’s good news, even if it doesn’t prompt the buzz that accompanied the post-recession runup that is expected to push average resale prices up 7.6 per cent this year.
“Sales will not reach the peaks we saw early this year and late last year,” warns Sandra Pérez-Torres, the Canada Mortgage and Housing Corp.’s senior analyst for Ottawa.
But the slip shouldn’t be accompanied by any drop in values, she told the CMHC’s annual Ottawa Housing Outlook conference Tuesday. The agency expects prices to increase at the rate of inflation, about two per cent, as the sector moves to more balanced territory from a buyer’s market.
Stability is also forecast in the new homes sector, with a slight increase in starts this year over 2009, followed by a 3.4-per-cent drop next year. Multiple-family units will continue to outpace single-family dwellings, with townhomes leading the way.
Keeping Ottawa on the real estate level is a diversified economy (public administration, though the most visible local employer, represents just 22 per cent of jobs) and steady — if moderate — population growth.
Employment growth in 2010 has wiped out recession job losses, and further gains are expected in 2011, CMHC said in a report.
As well, average weekly earnings should rise 4.1 per cent next year after remaining flat in 2010.
“Ottawa is definitely the best place to be,” Pérez-Torres said.
The income growth will keep the housing sector healthy, though more sales could come early in the year, driven by the prospect of increased borrowing costs.
CMHC’s forecasts aren’t infallible.
Last year, for example, it predicted an average 2.3-per-cent rise in resale prices in Ottawa in 2010.
Pérez-Torres said continued low interest rates spurred more first-time buyers to enter the market, contributing to an average increase now expected to reach almost eight per cent.
Similarly, unexpected layoffs in Ottawa could make the 2011 market behave far differently than predicted, she said in an interview.
Even with this year’s increase, CMHC predicts an average price of $328,000 for a home sold through the Multiple Listing Service in 2010 — well below the cost of a comparable home in more volatile markets like Vancouver or Toronto.
For new construction, the average detached home is expected to reach $422,750 this year, up 4.0 per cent from 2009, while the average semi-detached unit will slip 1.9 per cent to $375,000.
In the rental market, an already low vacancy rate is expected to drop even further next year.
CMHC predicts an October 2011 vacancy rate of just 1.2 per cent, down from 1.7 per cent in October 2010.
In three previous Octobers, the rate varied from 1.4 to 2.3 per cent.
Average rent for a two-bedroom apartment reached $1,065 last month, up 3.6 per cent from a year earlier, and is expected to rise another 3.8 per cent to $1,105 by October 2011.

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