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TD Economists like “soft landing prospects” in Toronto market, on track for slight 4 per cent decline next year

“Tighter housing policies have helped to kick-start a soft landing in the GTA housing market, while gradually rising interest rates later this year are likely to help solidify it.” — TD Bank Economists Michael Dolega and Diana Petramala

 

TD Economists see a soft landing for Toronto’s real estate market after intervention by the Ontario Government.

 

The “soft landing” was the elusive goal of the Ontario government sought with new “Fair Housing” rules recently introduced. [Refer to this feature covering those rules>>] The reaction in the market was quick, but moderated. There hasn’t been a harsh adjustment, and, according to TD Economists, they expect a very soft landing.

“Overall, the adjustment in the GTA reflects lessened investor activity, and should offer a better opportunity for first time home buyers who now face more choice and fewer bidding wars,” writes Dolega and Petramala in their research report.

Soft landing and balanced seller-buyer market?

They also predict “a soft landing” that “should see sales return to their longer run trend, while price growth decelerates more in line with underlying income growth.” The sought for balance, a market good for both seller and buyer, is in sight.

 

After surging prices driven by demand, Ontario’s Fair Housing rules seem to have softly moderated the market. According to TD Economists, Real Estate prices are expected to gently deflate by 4 per cent by next year — not bad for sellers, good for buyers.

 

The economists indicate “The average home price is now on track for a 12% gain this year, or somewhat lower than the 15% we were anticipating in April. Average prices in the GTA are also on track for a 4% decline next year, largely in line with the 3% decline expected in the Greater Vancouver Area (GVA) this year.”

Toronto home sales, according to TREB, fell 20.3% in May, and although prices dropped month-over-month from $920,791 (April) to $863,910 (May), they are still up year over year. Listings have also increased, relieving some of the pressure in the market that was excluding some buyers.

The economists describe the scenario as a “welcome cool-off,” and compare it to the similar cool-off in the Vancouver market previously when similar rules were brought in.

 

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