The Toronto real estate board creates an outlook report at the start of the year. You can find a portion of the report below. Changes in Canadian mortgage rules are impacting the market. The lower end of the Toronto housing market (sub 1 million) is still very active.
Looking forward, the forecast range for TREB MLS® sales in 2018 is between 85,000 and 95,000. The midpoint of this range suggests an annual sales count slightly lower than the 2017 total. It is anticipated that year-over-year declines will be more pronounced in the first four months of 2018, as comparisons are made to the record pace of sales at the beginning of 2017. Conversely, sales are expected to be up on a year-over-year basis as we move through the late spring and summer months.
Ipsos polling of intending buyers supports a flatter sales trend in 2018, with buying intentions lower compared to a year ago. Of particular note is the dip in first-time buying intentions over the past year. There remains a degree of uncertainty in the marketplace due to the psychological impact of the Ontario Fair Housing Plan and changes to mortgage lending guidelines. First-time buyers are flexible – they can continue to rent or live with family, for example, while they decide when, where and what type of home they intend to purchase.
Changes to mortgage lending guidelines, including the OSFI-mandated stress test, will affect home buyers. The Ipsos survey of intending buyers found that 26 per cent of intending buyers felt that they wouldn’t qualify for a mortgage two percentage points higher than the current market rate on their home of choice. However, in response to the stress test, many intending buyers will change the type and/or location of home they are looking to purchase or potentially tap other down payment sources, rather than simply deciding not to purchase a home.
The forecast range for the average selling price in 2018 is between $800,000 and 850,000. The midpoint of that range suggests a slight increase in the average selling price this year. Similar to sales, year-over-year declines in the average selling price will likely be reported in some months during the first half of the year, as comparisons are made to the high price levels reported at the beginning of 2017. During the second half of 2018, annual rates of price growth will be in the mid-single digits, with enough competition between buyers to see rates of growth above the rate of inflation.
The pace of home price growth will not be uniform across market segments in 2018. Expect tight market conditions for condominium apartments to underpin continued double-digit rates of price growth in this market segment. Conversely, the pace of growth for more expensive detached homes will be less brisk.
“Fundamental demand drivers promoting housing demand will remain in place in 2018, including immigration-driven population growth, job creation and low unemployment across a diversity of economic sectors. However, we must be cognizant of the fact that, in the short term, higher borrowing costs and the effects of federal and provincial policy decisions will act as a drag on demand for ownership housing. It is also probable that provincial rent control legislation will stunt the supply of available rental units, resulting in a continuation of average rent growth well-above the rate of inflation,” said Jason Mercer, TREB’s Director of Market Analysis.
Housing and Transportation Diversity Research
In addition to analyzing how market fundamentals influence demand, supply, and price growth, the report also includes several sections with new research focused on improving our regional transportation network. Studies from the C.D. Howe Institute and the Toronto Region Board of Trade, as well as submissions from government policymakers, including Toronto Mayor John Tory and other GTA Regional Chairs and mayors, all serve to identify the main issues with, and present innovative, evidence-based approaches to, solving these problems.
“The transportation infrastructure in the Greater Golden Horseshoe needs improvement, especially if we’re to keep up with the demographic changes that continue to shape our region. This report is full of evidence-based research and data that can help to serve as the basis for implementing innovative and practical solutions to many of the transportation and transportation infrastructure problems we face today, which is critical, because waiting to solve these issues is not an option,” said TREB CEO John DiMichele.
The report also features sections on the New Homes and Commercial market segments, and presents exciting research on the “Missing Middle” in housing from the Canadian Centre for Economic Analysis (CANCEA), which seeks to provide a new solution to address ongoing housing supply pressures in the region.