Modest rise expected in Toronto housing prices next year
Tony Wong – Toronto Star Moneyville
Toronto existing home sales will drop in 2011, but prices are forecast to rise at about the pace of inflation.
“More balanced housing market conditions overall will exist in 2011 and inventory levels should remain stable,” said ReMax in its housing outlook forecast released Tuesday. “Slow but steady economic recovery is forecast for the GTA moving forward.”
Prices are expected to hit $440,000 at the end of 2011, up from $430,000 at the end of this year.
Despite the uptick in pricing which is within the target inflation rate set by the Bank of Canada, sales are expected to drop by 3 per cent to 83,000 units, compared with the expected 85,500 units at the end of this year.
The ReMax forecast is more optimistic than those of other analysts who have said the overall Canadian market is overpriced anywhere from 10 to 25 per cent.
Comment: Remax did not say if the market is overpriced, just what it is going to do next year. And those who say the market is overvalued have been quite thoroughly discredited. The worst one was the UK study that said we were 23% (not 25%) overvalued. They do not even live here, what gives them the right to make such claims? Their methodology was shown to be flawed and incorrect anyway.
“One change on the horizon is an absence of the seller’s market conditions the GTA has been accustomed to for much of the past decade,” said Shaun Hildebrand, senior market analyst for the Canadian Mortgage and Housing Corp.
Comment: Uh… from someone in the trenches, there are more bidding wars now than last month. It is still a seller’s market, pretty much has been for the past 5 years. To hint otherwise is dangerous, as it sets an incorrect level of expectation for buyers.
The CMHC, in a separate forecast, is not as bullish as ReMax and is only expecting 81,500 sales in 2011. Average selling prices, according to the CMHC, should be $428,000, below what they are expected to hit this year.
The Canadian Real Estate Association has also downgraded its forecast four times this year. After initially projecting an increase in house prices for 2011, the association is now saying prices will fall by 1.3 per cent.
Toronto is joined by Kitchener-Waterloo, Barrie and Barrie with a projected 2 per cent rise in prices according to the ReMax report.
London, Ottawa and Sudbury are expected to see prices rise by 5 per cent.
“Continued low interest rates will keep households interested in buying, but won’t lead sales to new highs,” said the CMHC. “Prices in the resale market are no longer at stimulative levels after growing faster than incomes over the past couple of years.”
This should impact the important first time home buyer market, said Hildebrand.
One mitigating factor is that the share of the population in their peak earning years from 45 to 54, should peak, meaning the reduction in first time buyers will be offset by greater sales from move up buyers.
Remax is forecasting that the $1.5 million move up home market will continue to do well in 2011. That luxury market is already up by 50 per cent in 2010. Strong sales in the high end is expected to prop up average prices for next year.
ReMax says several trends should help to keep the market stable.
• Land scarcity. Developers are having a harder time finding suitable land which is helping prices remain stable.
• Immigration remains a serious force in stimulating demand. An estimated 250,000 immigrants arrive annually, with the bulk of them settling in Ontario.
“While the formation of new households used to take an average of five years, a growing number of newcomers arrive skilled, financially secure, and read to make their home buying moves,” said ReMax.
• Volatility in money and stock markets continue to drive some investors to real estate.
However, lower than projected growth rates for the Canadian economy and a still ailing U.S. market will be hindrances moving forward, say analysts.
Meanwhile, buyers priced out of the single detached market are turning to condos, where prices are flattening.
About one third of the 20,000 condos registered in the last 18 months went back on the resale market according to CMHC research. Those condos sold for prices comparable to pre-construction sales pricing for new condos.
“This allows buyers to buy new without the long construction wait,” said Hildebrand.
Contact the Jeffrey Team for more information – 416-388-1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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