Home ownership drifting further out of reach: CMHC

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This article was published 21/04/2022 (980 days ago), so information in it may no longer be current.

Buying a home in Winnipeg will be increasingly expensive over the next couple years, but prices won’t skyrocket as they have in the recent past, according to a new report by the Canada Mortgage and Housing Corporation.

A strong economy, new immigrants and a domestic population vying to buy a house will help keep prices above pre-pandemic levels, according to the CMHC’s spring housing market outlook.

“With mortgage rates rising and continued growth in house prices, home ownership might move out of reach for many aspiring home buyers,” said Bob Dugan, the CMHC’s chief economist, during a Thursday news conference.

The CMHC’s outlook predicts home sales and price growth will stay elevated across the country this year. In 2023 and 2024, the sales and cost increases should simmer to normal levels, but houses’ price tags won’t return to what they were pre-COVID-19.

An average Winnipeg home in 2021 cost $349,753, according to the report. It forecasts the median cost in 2024 to be $379,000 in a low scenario and $419,500 in a high scenario.

The outlook is based off data from March 9 and earlier. On Tuesday, Royal LePage released its own findings that an average Winnipeg home cost $387,900 in March.

The CMHC predicts that, in 2022 overall, an average Winnipeg house will cost $362,500 in a low case scenario and $382,000 in a high case — both below Royal LePage’s count.

“People’s incomes are going up, and they’re looking to spend that money on homes,” said Jesse Hajer, an economics and labour studies professor at the University of Manitoba.

In many cases, shoppers are searching for bigger spaces to accommodate remote work, he noted.

Canada’s real GDP came in at 4.6 per cent in 2021 following a decline of about 5.2 per cent the previous year. And, Winnipeg’s employment rate grew by 5.4 per cent last year.

“When we look ahead, we expect the economy to continue to expand at a fairly strong pace,” Dugan said.

Manitobans are buying houses, but, like the rest of the country, supply can’t meet demand. Canada trails behind the G7 average of housing stock per capita.

“How many homes would we have to build overnight to get up to the average of the G7? That’s about 1.8 million homes,” Dugan said.

Internal estimates suggest the number of needed houses is higher, he added.

Canada is expected to begin 247,700 to 273,100 housing starts this year.

“We need to… find some way to be much more proactive in terms of home building,” Dugan said.

The CMHC’s outlook predicts Winnipeg will see 6,300 housing starts in 2022 — on the high side — but there should be at least 7,700 this year, Lanny McInnes from the Manitoba Home Builders’ Association said Monday.

‘With mortgage rates rising and continued growth in house prices, home ownership might move out of reach for many aspiring home buyers.’– Bob Dugan, the CMHC’s chief economist

Climbing interest rates — which raise the cost of mortgages — contribute to the heightened price of homes. Canada’s inflation rate hit a 31-year high of 6.7 per cent last month; the Bank of Canada has been increasing interest rates to discourage people from borrowing and spending money.

Still, the rates won’t flatten demand in Winnipeg, the CMHC predicts. Between a burgeoning economy, immigrants and a growing group of 25- to 34-year-olds ready to enter the market, demand is there.

“Even if demand pulls back, there can still be excess demand just because of the very low level of supply in the housing market,” Dugan said.

Some families won’t be able to afford home ownership, Hajer said.

“The increase (in interest rates) is going to make it harder for people to get into that housing market, and it’s going to create more inequality,” he said.

Home ownership has been a cornerstone of the middle class, he noted.

“As home prices go up, the main asset that your average family owns is your house, so you benefit from the appreciation in that value,” he said. “If you can’t buy a house, then you’re left out of that cycle.”

“We are currently facing very high levels of inequality in our society… and this is only going to exacerbate that problem.”

Higher demand could be placed on rental units as interest rates rise, said Taylor Pardy, a market analyst for the CMHC.

The CMHC is projecting “stability in the vacancy rates” in 2022 and some gradual decline in 2023 and 2024 because of new rental buildings hitting the market, Pardy said.

The federal forecast declares a “modest growth” in average rent over the next couple years. Winnipeg’s one-bedroom apartment rent dropped 2.6 per cent this March compared to last, to an average $1,142, according to Rentals.ca statistics.

Two-bedroom rent dropped 4.1 per cent during the same time frame to $1,414, Rentals.ca said.

“It’s not just about creating more (rental) supply, but about what kind of supply is being created,” said Kris Clemens, End Homelessness Winnipeg’s communications and community relations manager.

Luxury apartments don’t help low-income families, she said.

“If more people with higher incomes are trying to enter the (rental) market because they’re shut out of home ownership, then of course that increases competition and drives rent up,” she said.

A lack of affordable housing causes folks to “look for places that are out of reach,” Clemens noted.

“That, of course, puts them at greater risk of eviction and homelessness if they get behind on their rent or they miss a cheque,” she said.

A November CMHC report showed 359 vacancies in the province’s 33,168 social and affordable housing units. Just 3,608 of the units were built in 1990 or later.

Indigenous families are disproportionately represented in such spaces and need culturally appropriate housing, Clemens said.

A CMHC spokesperson cited several federal initiatives meant to tackle affordable housing. They include the Canada-Manitoba Housing Benefit, which is given to eligible renters needing assistance paying for core housing, and the Rapid Housing Initiative, launched in 2020 with a $40.1 million budget to construct 222 affordable units in Manitoba.

The spokesperson also listed an agreement where, in 2019, both Canada and Manitoba signed a 10-year deal to invest almost $450.8 million into renewing and expanding social housing, and the National Housing Co-Investment Fund.

Ottawa has pledged $10 billion towards housing in its latest budget.

gabrielle.piche@winnipegfreepress.com