CMHC: Housing in Canada to Cool in 2007

Toronto, Ontario, February 5, 2007–Canadian housing starts will moderate this year from last year’s torrid pace, but will still remain at historically strong levels, Canada Mortgage and Housing Corp. said in its quarterly forecast on Monday.

Starts should ease to 209,500 units this year after hitting 227,395 units in 2006, CMHC said, as the impact of past interest rate hikes combines with steadily rising housing prices to cool what has been a red-hot market in recent years.

“Construction activity will continue to moderate as demand for home ownership moves toward more sustainable levels,” CMHC chief economist Bob Dugan said in a statement.

The Bank of Canada raised interest rates seven straight times between September 2005 and last May, making mortgages more expensive. The bank’s overnight rate is now 4.25 percent, up from 2.5 percent at the beginning of the string of increases.

Starts in 2008 are expected to ease further to 195,500.