Sales of both condos and high-end homes have slowed so significantly in the last few months across the GTA that the Canada Housing and Mortgage Corpis downgrading its housing market predictions for the rest of this year and next.
In fact, housing activity is expected to cool across much of southern Ontario well into 2013 because of high prices, rising inventories of new condos, tougher mortgage lending rules and less investor demand, CMHC says in a Housing Market Outlook report released Tuesday.
“Housing activity will hold up better in northern and southwestern Ontario communities thanks to improving goods sector performance, relatively less expensive housing and an improving migration picture,” says the report.
While condo sales are slowing, highrise construction continues to dominate the GTA housing market because most of the record number of units that were sold last year — some 28,000 — have yet to be built.
“Toward the second half of (2013) we’re going to see more of a moderating effect because of the slowdown in new condo sales that we’re starting to see now,” said Shaun Hildebrand, a senior market analyst with CMHC.
When it comes to the resale housing market, CMHC had been predicting some 95,000 real estate transactions across the GTA by year’s end. It now expects closer to 91,500.
Next year, that number could drop to 88,000, according to CMHC projections in its forecast report, released quarterly.
The drop in demand is not only hitting the lower end of the housing market — condos — but high-end homes of $1 million and up. The latter have been in especially high demand the last year but are now facing a drop in demand. Hildebrand attributes that to continued economic uncertainty, poor stock market returns, slow income growth and prices that have grown out of whack because of inadequate supply.
“The $500,000 to $1-million bracket seems to be holding up relatively better than the lower end and higher end of the market,” he notes.
Demand remains strong in that sector, in large part because homes have virtually doubled in price across the GTA over the last decade, boosting the equity available to those homeowners looking to move up.
While that is opening up supply for first-time buyers, some of that demand is now being offset by yet another set of tough new mortgage rules, introduced by Federal Finance Minister Jim Flaherty in a concerted effort to cool Toronto’s and Vancouver’s housing markets, that have locked some first-time buyers out of the market.
While the CMHC predictions may sound worrisome to some, Hildebrand termed the housing forecast “optimistic.”
“We’ve been waiting for this moderation in the market to materialize for some time,” he said. “We’re starting to see homes sit on the market a little bit longer now and fewer instances of multiple offers.”
While high prices and tougher lending rules may shrink the ranks of eligible first-time buyers, “this is the ideal buying environment for somebody who is looking to move up in the marketplace.”
Source: Toronto Star