Sudbury's hot real estate market is expected to cool off for the rest of the year, before before bouncing back in 2014.
“Single-detached starts will see 15 per cent drop in 2013, while they are expected to post 12 per cent increase in 2014,” said a release this week from the Canadian Mortgage and Housing Corp. “Starts of semis, rows and apartments will exhibit similar declining trends this year, but are expected to recover next year, reaching 2012 levels.”
While construction is cooling, prices for homes will continue to increase, the CMHC says, with prices rising by 4.4 per cent in 2013 and 3.6 per cent in 2014.
In the resale market, existing home sales will decline in 2013 by 7.1 per cent, CMHC says, before bouncing back next year with a forecast increase of 5.3 per cent.
“The softness in the existing home market will come mostly from the first-time homebuyer segment,” the release said. “Potential first-time buyers are postponing plans for homeownership, which is reflected in a declining vacancy rate for Sudbury.
“On the other hand, repeat buyers will dominate the resale market, as they continue to take advantage of lower mortgage rates and have the ability to pay larger down payments for more expensive homes.”
Part of the slowdown is related to lower nickel and copper prices, which have been trending downward over the last few quarters, the release said. Demand in emerging markets, such as China and India, has weakened, metals prices should bounce back as the global economic recovery picks up steam in 2014.
“Sudbury is well poised to recover its economic strength in 2014 as growth in the global economy gains traction and exports contribute a bit more to the Canadian economy,” CMHC said.
The decline in new construction in Greater Sudbury will help offset weaker demand, helping to keep the market balanced and resale prices growing above the rate of inflation.
“The average MLS price will increase by 4.4 per cent this year and by 3.6 per cent in 2014,” the report said. “Although price increases are expected this year, average income growth is not expected to keep pace, thus reducing affordability in Sudbury.
“However, average income growth will resume in 2014, easing the downward pressure on affordability. Despite persistent price increases, Sudbury remains one of the more affordable centres with population over 100,000.
In raw numbers, new home construction is expected to drop to 369 units in 2013, with the biggest drop in single-family homes -- 32 per cent to 200 units, as compared to 30 per cent drop for semi-detached/row/apartments to 169 units.
“Additionally, lower demand for resale housing and higher cost of construction will continue dampening overall housing starts activity for the remainder of the year.”
By 2014, new home construction should bounce back, with a forecast of 445 new starts for the year. Semi-detached and townehouses will lead the way, increasing by 32 per cent and 29 per cent respectively. First-time homebuyers should be busy, as the mining sector recovers and younger workers are in a better position to afford a home.
Average sale price for single-detached homes will be $283,258.
In addition to a recovering metals market, Sudbury should benefit from some major projects, including the construction of the downtown school of architecture and Vale's Clean AER project.
“Moreover, investment in Sudbury of some largest mining companies in the world could also result in more money being available for exploration and development in the region,” the CMHC report said. “Skilled labour shortage is a major concern for employers looking to expand their capacity, especially in mining and construction industries.”
That will lead to increased migration – from within Canada and globally – as employers search for people with the skills needed to fill 21,000 jobs, which is the estimated number of new jobs and retirees combined over the next 10 years.
The resurgence in metal exports will give a boost to burgeoning mining supply sector in Sudbury, the report says. In fact, Sudbury has the third biggest mining and supply service sector in Canada, after Toronto and Vancouver.
“A recent example of this is a large Chinese manufacturer of crushers and mineral processing equipments opening sales and service base for the Americas in Sudbury more recently,” the report said.