Economic growth was soft in 2016, according to the Crown Corporation, dragged down by weak business investment.
“On the positive side, consumer spending growth picked up, while residential investment continued to increase,” CMHC said in its report. “Overall, the Canadian economy managed an increase of 1.4% in 2016. Real GDP is forecast to expand at a steady pace throughout the forecast, with growth in the 1.2-2.6% range in 2017 and 2018.”
Looking forward economic growth will be driven by government stimulus, an improving energy sector, and a rebound in exports in the near future.
CMHC continues to sound the alarm about household debt, claiming it’s the most important risk to Canada’s economic outlook.
“This vulnerability could amplify the impact of an economic shock if indebted households begin to deleverage or struggle to repay their debt balances in the event of a rise in unemployment,” CMHC said. “Rising interest rates are another risk that would boost the cost of debt charges carried by borrowers causing many households to cut back on spending.”
The Crown Corporation’s Housing Market Assessment framework continues to detect problems in the housing industry – specifically in Toronto, Hamilton, Vancouver, and Victoria.
“Altogether, resale prices continued to post gains throughout 2016, with much of the growth fuelled by British Columbia’s lower mainland and the Greater Toronto Area. In 2017, house prices will continue to rise, but at a considerably slower pace than in the previous years,” CMHC said. “There are a number of factors that are expected to dampen the outlook including tighter mortgage rules, the uncertainty over resource prices, and the shift in the distribution of sales from the higher end of the market toward lower-priced units, such as condominiums.”
The average national home price was $490,000 in 2016 and is expected to fall somewhere between $484,000 and $508,000 in 2017.
Resale activity, which was 535,000 units last year, is expected to moderate to a level between 490,000 and 510,000.
“Demographic fundamentals are expected to stay soft throughout the near term, and this will result in weaker housing starts this year and next,” CMHC said. “Housing starts are forecast to drop from 198,000 units in 2016, with the annual total to remain in the 173,000-184,000 units range in 2017 and 2018.”