The Canadian housing industry is expected to see a slump in 2008 due to rising house prices, lack of skilled labor, and increasing prices of construction material.
Canada is expected to see slight slowdown in new home construction this year due to rising home prices push carrying cost. On the contrary, the domestic housing market in south of the border will remain strong, said Canada Mortgage and Housing Corp. (CMHC), reported Reuters on February 4, 2008.
CHMC forecasted that the housing industry will cross 200, 000 for seventh time in a row with 211,700 units are expected to come up this year. However, this year’s figure is less than from 228,343 units of 2007. Besides, the sale of existing home is expected to decline by 3.9% this year, equivalent to 499,650 units from 520,000 units last year. The sale of existing houses is expected to further decline next year and may reach to 488,300 units.
The decline in housing industry of Canada in 2008 is attributed to increase in house prices that will increase mortgage-carrying costs for homebuyers. Apart from this, lack of resources, including skilled labor, is also responsible for low prediction by CHMC because construction of new homes is taking longer time than expected.
Another reason hitting the Canadian housing industry is instability in the global financial system owing to slowdown in the US housing industry. Besides, Canada relies on the US for construction material and the US is taking advantage of this situation and providing construction material at higher rates.
Constructing a new home in Canada is very expensive as compared to buying a constructed home, so the demand for buying a resale home is rising. Buying of resale home will help in removing some pressure from the Canadian housing industry. Moreover, Canadians will continue to see rise in the employment levels and income gains, indicating a positive growth in the resale of housing industry.
As per a Research Analyst at RNCOS, “The Canadian housing industry is expected to see a slowdown in 2008 due to rising housing prices but this decline in new home sales will be offset by increasing sales of old houses. Lack of professionals and skilled labor is the biggest problem for the Canadian housing industry, which can be sought out with government cooperation. As the demand for old houses is significantly high in Canada, the government should come forward to build new homes itself and then sale them. This will help in maintaining the robust growth in the market.”
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