(Reuters) -Canadian home price and sales growth will moderate in the coming years from recent pandemic-era highs but stay elevated in 2022 as higher employment and immigration drive demand, the national housing agency said on Thursday.
Sales and price growth will continue to moderate more in line with historical averages by late 2023 or early 2024 amid higher mortgage rates but elevated price levels will persist, putting greater pressure on affordability for new homebuyers, the Canada Mortgage and Housing Corporation said in its 2022-2024 market outlook.
"Improving levels of employment and immigration are expected to be key factors as the impact of pandemic restrictions continue to recede," Bob Dugan, chief economist at the CMHC, said in the report.
"Price growth will likely continue to be led by markets with low listings, including Vancouver, Toronto, and Montreal," he said.
Canadian housing prices have surged during the COVID-19 pandemic, with the average cost of a home rising more than 50% over the last two years, according to data from the Canadian Real Estate Association.
The government has blamed a lack of supply for the strong price gains and pledged to double the pace of homebuilding over the next decade. That plan could prove complicated with construction already at multi-year highs and labor markets extremely tight.
Still, the red-hot housing market has shown some signs of cooling as Canadian interest rates rise, with the average home price falling 2.5% in March from February and sales down 5.4%, the Canadian Real Estate Association said on Tuesday.
The Bank of Canada last week doubled its benchmark interest rate to 1% and Governor Tiff Macklem said more rate increases would be needed to curb inflation, pledging to do so "forcefully" if necessary.
Rental affordability is expected to decline over the forecast period due to increasing demand and low supply of rental housing, CMHC also said in its outlook.
(Reporting by Chris Gallagher in WashingtonEditing by Paul Simao)