Canada's Condominium Magazine
Ontario’s existing home sales and new home starts will trend lower over 2018 and 2019, while prices will continue to grow — although more modestly — according to the latest forecasts from the Canada Mortgage and Housing Corporation (CMHC).
“Multi-unit starts led by condo and rental construction will remain elevated,” states the Fall 2017 CMHC Housing Market Outlook released today.
The main highlights of the report are:
- Ontario existing home sales and starts will trend lower over the forecast horizon.
- Ontario home prices will grow more modestly versus the recent past.
- Demand for rental accommodation will continue to grow.
- Rising mortgage carrying costs will be partially mitigated by a healthy labour market and high levels of in-migration.
New home market
In the new home market, condos and multi-unit construction starts will continue to be “elevated”, which is good news in the rental market where there is a significant shortage of vacant inventory.
Other types of homes will trend lower into 2018 according to the forecast, while single-detached construction will erode and decline due to “affordability and increasing efforts to intensify.” Eastern and southwestern Ontario will fare best due to “stronger local economies, fewer imbalances and high levels of affordability.”
However, the report cited conditions where the “outer range” (higher) forecast might be achieved, mainly “if job growth is better than expected and if more serviced land becomes available for low-rise development.” On the other hand, the lower end of the range is foreseeable if government introduces new policies, or if serviced land available for development remain tight.
Existing home market
According to the report:
Resale activity cooled in the second and third quarters of 2017 as the Ontario Fair Housing Plan contributed to a dampening of consumer price expectations. Potential home buyers saw no urgency to buy while vendors hoped to lock in home equity gains by bringing more homes to market.
The pullback in sales from peak levels was more pronounced in Toronto and surrounding centres where imbalances were present and much less so in eastern and south western Ontario markets.
Existing home sales should post modest growth in early 2018 before slowing job growth, eroding affordability and modestly growing listings weigh on sales later in the forecast horizon.
A more balanced resale market and shifting demand from singles to multi-unit homes will dampen price growth. Existing home sales and prices could be at the upper end of
the outer range if the Ontario economy grows above forecast, if interest rates rise more modestly and if less serviced land is available for new single detached construction.
Existing home sales and prices could be at the lower end of the outer range if additional housing policy measures are introduced and if more serviced land is available for single detached construction.
Demand for rental accommodation will continue to grow across the province. More primary and secondary
rental completions will temper the drop in vacancy rates.
Eroding affordability, an aging population and high levels of in-migration will continue to support rental demand
particularly in Ontario’s more expensive markets.
Vacancy rates could drop more than expected if growth in employment is stronger than expected, if affordability erodes faster than expected and if the supply of new rental slows.
Mortgage Rate Outlook
Mortgage rates are expected to rise over the period 2017-2019.
This increase is consistent with the expected improvement in domestic economic conditions and the predicted increase in
world interest rates.
In our baseline scenario, the posted 5-year mortgage rate is expected to lie within the 4.9%-5.7% range in 2018 and within the 5.2%-6.2% range in 2019. Hence, the expected increase in this rate over 2017-2019 should be at most 160 basis points.