Tag Archives: toronto housing
Carolyn Ireland – The Globe and Mail
For now, anxious sellers in the Toronto real estate market who are hoping for a spring rebound seem evenly matched by optimistic buyers looking for a deal.
Bank of Montreal economist Douglas Porter looks at the Toronto housing market and sees a satisfying balance. But February is traditionally the month when the spring market revs up and Mr. Porter says any number of things could upset that balance – and the tilt could go either way.
So far sales have slumped – the most recent numbers show a 19.4% drop in December compared with a year earlier – but prices have only edged down slightly.
Comment: Nope, not in Toronto, they actually rose. And in mid-January we saw sales up and prices up.
This could be the market coasting to the soft landing that many economists have been predicting.
Mr. Porter, who is deputy chief economist at BMO, is betting that the market will continue to waft gently downwards as it has been doing since federal Finance Minister Jim Flaherty toughened up the rules on mortgages last July.
“It’s hard to see what would push the Toronto housing market into a so-called hard landing.”
Comment: It is hard to see the Toronto real estate market slowing in any real way, to be honest. Well, condos are flattening out, but houses will stay strong for the long term.
Mr. Porter says the risks to the market include a hike in interest rates or reverberations from the United States as politicians grapple with the country’s debt and spending. Europe could also go off the rails.
Comment: No interest rate hike this year according to the BoC. And the US actually seems to be heading upwards, their housing market at least.
Another risk is that the market could spiral down in a “vicious circle.”
“It is a possibility that buyers will step back waiting for prices to fall – and then they will – and buyers will step back even more.”
Comment: But that happened in 2008 and prices did not really fall, so buyers came back. But the supply was limited, which pushed prices up. Same thing now – buyers left the market in the 2nd half of 2012, sellers then followed. Now buyers are back, but sellers will be slow to return. This will tighten supply and this spring could see bidding wars and high prices again.
At the same time, Mr. Porter says real estate in Toronto could climb again if the U.S. economy comes bouncing back.
“That is a reasonable prospect,” he says. “We already know their housing market is on the road to recovery.”
Canada’s economy would receive a boost and broader sentiment would improve too, he adds.
Still, Mr. Porter believes the most likely scenario is that real estate prices in Toronto at the end of 2013 will be slightly lower than they were at the end of 2012.
Comment: Not on average. Condos, I could see that, even if it is a 1% drop. But freehold housing? No way.
The “incredible amount of building in condos” could lead that segment of the market to fall harder, he adds.
Comment: Except there is a lot of action. They rent out in hours, every crane means 80% of a project is sold, though most are at 90%. Investors are begging developers to build more. There is a slow down in CityPlace and Liberty Village due to a lot of boring similar little units on the market.
Economist David Madani of Capital Economics thinks the Toronto market feels an awful lot like the mood in the United States before the vicious circle started there. He believes buyers and sellers are at a stalemate in Toronto. Mr. Madani has long been calling for a 25% correction in the market and he believes that sellers will eventually be forced to accept lower prices.
Comment: No, they won’t. As we saw at the end of last year (and to some degree in 2008 and 2009) sellers just took their properties off the market. As supply dwindled, buyers lose any control they might have had. Then they start bidding on them and push prices up. Supply then increases as sellers see good market conditions, the pent-up buyers then pounce on anything that is out there. Sales volume and prices then both rise. This 25% drop is as stupid now as it was a year ago. Since then prices have risen 6.9% for 2012 over 2011, yearly. So they were off by almost 32% in their prediction, nice!
Mr. Madani doubts that many buyers will be lured into the market by low interest rates. He thinks they’re more likely to be deterred by tougher borrowing standards and all of the warnings coming out of Ottawa about household debt. Investors, meanwhile, aren’t likely to step up if they fear prices will fall – especially in the overbuilt condo market, Mr. Madani says.
Fewer potential buyers mean that some sellers looking to upgrade will be unable to, Mr. Madani warns. In fact, this is already happening. Condo owners weren’t making offers on single-family houses because they can’t sell their units or they’re afraid to even try.
Comment: Hearsay, where is the proof, the stats?
Still, Mr. Madani says a spring rebound in the housing market can’t be ruled out.
He notes that the market has slowed then accelerated again after past changes in the regulations.
But he figures the Bank of Canada will maintain a tightening bias in monetary policy to discourage such a run-up.
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.
Incoming search terms