Vancouver housing market to cool in 2016, 2017: CMHC

"With the condominium market running out of steam, a few builders have begun to look for other opportunities, and the low vacancy rate for newer rental buildings seems to indicate a certain demand for more modern units", said David L'Heureux, Senior Market Analyst at CMHC.

Vancouver continues to top the list with the average home listed at 887-thousand, followed by Toronto at 612-thousand.

The Canadian housing market is expected to cool over the next two years, Canada Mortgage and Housing Corp. said Monday in its fourth-quarter outlook. CMHC expects housing starts and sales through the Multiple Listing Service system to slow in 2016 and 2017.

Increased activity in the hot markets of Ontario and British Columbia this year have offset the slowdown in oil-sensitive provinces such as Alberta, said CMPC Chief Economist Bob Dugan.

However, that counterbalancing is expected to decrease over time.

However, CMHC noted in its report that it expects interest rates to gradually rise from current levels starting late next year.

The national average cost of a home countrywide is forecast to reach as high as $475,000 in 2017, according to CMHC.

Overall, housing units are being built at a faster pace than they are being inhabited, prompting builders to slow down production.

This is particularly true of multi-unit projects, which are typically started two to three years before coming on the market, CMHC says. In 2016, sales are forecast to range from 425,000 to 534,000 units with a point forecast of 479,500, and from 416,000 to 536,000 units in 2017 with a point forecast of 476,000. The increase in the average Centris® price will hover around 1 percent over the forecast period.

CIBC economist Benjamin Tal argues this number is not out of line and does not indicate an oversupply of condos. "This market change will be due to a slight increase in demand and a small rise in the supply of rental housing", concluded Lapointe.