OTTAWA, - Canada's federal housing agency gave a cooler outlook for housing starts this year and next, saying that lower oil prices are contributing to differences across the country's regional markets.
In addition, with the inventory of completed but unabsorbed homes above the historical average, the pace of new construction is expected to moderate over the next couple of years, the Canada Mortgage and Housing Corporation (CMHC) said in a report.
Canada avoided the worst of the global financial crisis and its housing market has accelerated in the years since, helped by low interest rates. While some have raised the possibility the sector is due for a painful correction, policymakers still foresee a soft-landing on the national level.
The CMHC forecast that housing starts will range between 166,540 and 188,580 units in 2015, with a point forecast, or most likely outcome, of 181,618.
For 2016, CMHC expects a range of 162,840 to 190,830 starts, with a point forecast of 181,800, below the previous point forecast of 185,100.
"Lower oil prices are contributing to disparities between provincial housing markets," Bob Dugan, the CMHC's chief economist, said in a statement.
A slowdown in housing starts and resales in oil-sensitive provinces such as Alberta will be partly offset by increased activity in other provinces such as Ontario and British Columbia, which should benefit from cheaper energy prices, a weaker Canadian dollar and low mortgage rates, Dugan said.
The CMHC upped its price forecast for existing home sales compared with three months ago, predicting a price range between C$402,139 ($326,835.99) and C$439,589 in 2015, with a point forecast of C$422,129. That is modestly higher than the point forecast of C$414,200 was given in February.
Next year's point forecast was also raised slightly, to C$428,325 from the previous C$420,900. Still, with the recent decline in the price of oil, a major export for Canada, there is more downside risk to the forecast than upside, CMHC said.