The Housing Market Has Finally "Bottomed Out"
Is Now The Time To Buy?
Housing prices in Greater Toronto Area are expected to reverse course in the second half of the year after a brief slump, according to a Royal LePage forecast, despite the threat of escalating Canada-U.S. trade tensions that could dent the Ontario economy.
In its quarterly forecast released Tuesday, real estate firm Royal LePage expects housing prices in the GTA to rise 2.1 per cent in the third quarter, underpinned by a growing labour market, steady economic growth and still-low interest rates.
“Based on our analysis the market has bottomed out,” said Phil Soper, the CEO of Royal LePage.
Soper said recent headwinds for housing prices in the Toronto area will eventually be mopped up by the current undersupply of new homes, as Ontario’s population continues to grow and in-migration levels reach their highest in more than 10 years. The province saw a net gain in migration over the first quarter of 2018, a nearly 50 per cent increase from the year earlier.
“We’re nowhere near the kind of housing construction rate that we need to accommodate these people,” he said.
The rise in prices would mark a sharp turnabout. Aggregate home prices in the GTA declined 1.9 per cent in the second quarter of 2018, according to Royal LePage data, down to $821,632. The decline followed a precipitous decline earlier this year, when prices for detached homes fell 17 per cent in March, according to the Toronto Real Estate Board. That in turn pulled down selling prices across the board by 14 per cent, the largest drop in nearly 30 years.
Toronto’s long-overheated housing market cooled after several quarters of rapid growth last year, which sent prices skyrocketing. Late last year, the Office of Superintendent of Financial Institutions introduced tighter borrowing regulations making it harder for would-be homebuyers to qualify for uninsured loans, which also caused sales to decline.
Soper said prospective buyers who had once maintained a “wait and see” approach may now begin entering the housing market. But several risks remain, particularly if U.S. President Donald Trump levies additional tariffs against Ontario-based goods, like vehicles and auto parts. The Trump administration has already targeted steel, aluminum, Canadian softwood and other products.
“Ontario is more closely tied to the kinds of goods that would receive punitive American duties than the rest of the country,” Soper said. “If it was a prolonged situation it could impact employment and even send the Canadian economy into recession.”
Royal LePage data shows median prices for two-story homes in the GTA decreased 3.7 per cent in the second quarter, down to $955,395. Median prices for bungalows decreased 3.7 per cent to $799,307. Quarter-over-quarter, aggregate home prices increased slightly by 1.1 per cent.
Lower prices in the GTA and tighter federal mortgage stress tests dragged down the rest of Canada over the quarter, which “slowed the market to a standstill in much of the country” the Royal LePage report said.
The report also noted that Greater Vancouver home values are forecast to increase 1.5 per cent over the next three months.
“Purchasers look to condominiums for relative affordability, yet with competition continuing to intensify, property values within the segment now outstrip most detached markets across the country,” wrote Adil Dinani, real estate adviser, Royal LePage West Real Estate Services.
“To put it into perspective, the budget now needed to purchase a condo could have netted someone a two-storey home here in Greater Vancouver four years ago.”
Average prices across Canada increased two per cent, largely due to strong economic growth, rising populations and low interest rates.
Source: Jesse Snyder With The Financial Post