survey released today shows a housing market that is in trouble and in danger of struggling for another five years.
“What is cause for concern is that the housing market,” said Jim Murphy, president and CEO of CAAMP, “an important engine of growth for the Canadian economy, is slowing to such an extent that without any change it could take another five years to recover.”
The spring survey, Change in the Canadian Mortgage Market, warns of weakening with implications for the country’s economy, as a whole.
The man collecting and analyzing the data of the study, CAAMP Chief Economist Will Dunning, reveals that government restrictions on mortgage borrowing have set the stage for a steady decline in new home building, which will trigger job losses and a drop in housing-related economic activity by 2015.
“CAAMP has argued that government efforts to slow the housing market have long-term negative economic consequences and the data continues to support our assessment,” said Dunning. “Until now, housing has played a major role in the recovery from the 2008/09 recession. That economic driver is disappearing as we see housing-related jobs dry up and consumer confidence erode at a time when the national recovery is struggling to pick up steam.”
Some indications of an overall slowing of the housing market include:
- During the past nine months, the dollar value of housing resale activity was 8.3 per cent lower than during the year prior to the 2012 tightening of mortgage requirements;
- Reduced house sale activity brings lower incomes and employment across industries directly and indirectly involved in sales, financing, legal services, moving, renovations, sale of furniture and appliances, landscaping etc.;
- By April, seasonally adjusted rate of housing starts was down 15 per cent from the 2011/12 average (from 205,000 to 175,000 units);
- By mid-2015, CAAMP projects the total drop will be 25 to 30 per cent fewer housing starts, resulting in 150,000 fewer jobs;
- In the Greater Toronto Area, housing starts are projected to slow to 2,000 per month (a 50 per cent drop) by late 2014, leading gradually to a loss of about 35,000 jobs by mid-2015;
- In Vancouver, monthly housing starts may fall by about a third, to about 1,100 a month leading to about 7,500 jobs lost; and
- The Calgary and Edmonton markets are healthier with housing starts likely to rise by about 100 per month in each city, generating about 2,500 new jobs in each city as well.
Despite the restrictions on mortgage borrowing, the survey does show almost six million Canadians with mortgages are comfortably controlling their debt.
“The CAAMP survey demonstrates that Canadians with mortgages are managing debt responsibly, negotiating low interest rates and paying down their mortgage faster than required,” said Murphy.
The results for those holding mortgages showed:
- An average 69 per cent have fixed rate mortgages;
- Their average mortgage rate is lower - 3.52 per cent compared to 3.64 per cent last year;
- Some 18 per cent of mortgage holders increased their mortgage payments in the past year. An additional 16 per cent made lump sum payments on their mortgages during the past year;
- About 8 per cent of all homeowners took out equity, averaging $48,000, similar to 2012;
- 80 per cent of mortgages have an original amortization of no more than 25 years;
- Most borrowers plan to repay early – the expected average is 21.6 years; and
- 85 per cent of mortgages taken out in the last year were fixed rate.