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The CMHC confirms its forecasts for the housing sector: markets are still solid but are going down

The CMHC confirms its forecasts for the housing sector:  markets are still solid but are going down

Kevin Hughes and Paul Cardinal, Canada Mortgage and Housing Corporation have confirmed that that forecasts for the housing sector made at the end of 2005 – about six months ago - are not particularly accurate for all of Québec and especially for the greater Montréal area.

A press conference was called yesterday in Montréal to announce the adjustments to the forecasts.

Mr. Hughes revealed that residential construction was low in Québec. ''We continue to experience a decline”. Construction is not the only area where there will be a decrease in 2006 and 2007. This will also apply to the resale market which should be maintained with prices that will increase at least 10%, and present a more stable rental market.

Paul Cardinal, Senior Market Analyst for the Montréal region stated that the first sign of pause in the trends occurred in 2005. Therefore, the market fever of 2002 and 2004 is slowing down a bit. According to Mr. Cardinal, we are, however, at a healthy crossroad, while the increase in employment is slightly positive, interest rates are slowly climbing, and consumers’ interest will decrease slightly, and the migratory trend in Québec will still be positive.

M. Cardinal discussed the condominium situation with a « high quality » saturation point being reached in downtown Montréal in particular. In March, there were only 225 completed and unoccupied condominiums in downtown Montréal, but 2,200 more were under construction.

The best performing product – plexes - are located in the same sector and should continue this way in 2006 and 2007. The market is more of a sellers’ market rather than a buyers’ market.

Both CMHC representatives predict that interest rates should reach 7% for a five-year term at the end of 2006, and should maintain themselves at the same level during 2007.

Replying to a journalist’s question, Mr. Cardinal stated that he did not foresee a recession on the horizon, and that the evaluation of interest rates made by CMHC should not go beyond 2007. Immigration to Québec, and in particular in the Montréal region, will continue to be strong.

Finally, Paul Cardinal believes that after 2007, startups will align themselves to the number of households being formed.

About the author

Berthold Lévesque

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