Market Takes a BreatherEveryone has an opinion about why the GTA real estate market has slowed down. The mortgage brokers' organization blames the federal government's new mortgage rules introduced last Summer, which makes it more difficult to qualify for an insured mortgage. The Toronto Real Estate Board blames the City of Toronto's land transfer tax, which adds thousands of dollars to the cost of buying a house. Others believe the housing market was overpriced and buyers finally came to their senses.
Whatever the reason, anyone who takes the long view and looks at the history of housing markets knew that a slowdown would come eventually. Toronto real estate markets have always been cyclical. If history holds, the market is taking a breather and we are in for a soft landing before sales once again pick up. Canada Mortgage and Housing Corporation forecasts "moderate" sales grown in 2013, along with a 1.5% increase in prices.
Few economists believe there is a housing crash or that the market will experience a long drought like the one we have seen in the United States. Canadians have much more equity in their homes than many U.S. homeowners did before their market collapsed. Risky sub-prime loans account for only about 7% of Canada's total mortgage portfolio, which the U.S. had almost 25%. And although everyone is concerned about Canadians' personal debt levels, recent statistics show that we have been more cautious in recent months.
Toronto's employment numbers, while not spectacular, are solid enough to support the housing market. Record immigration is forecast for the GTA throughout 2013. Mortgage rates remain at near 60-year low and are not expected to rise soon.
So, we believe the sky is not falling. The market is just going through an unsurprising correction. Remember that buying a house is a long-term investment, and in the longer term the market is in good shape.
With that in mind, let's take a look at the numbers. GTA real estate sales are down 16% compared to this time last year. In the City of Toronto, the average price for a detached home is about $740,000 and the average condo price is about $350,000, both down 4% compared to the same period last year. In the 905 regions, the average price for a detached home is about $555,000 and the average condo price is about $279,000, both up 3% from the same time a year ago..
The real estate market traditionally 'slows down' over the holiday period but we are looking forward and forecasting for a robust and healthy 2013.
Condo market shows strength, Future looks even more positive
Resale apartment condominium sales are down by almost 25% compared to a year ago, but the market "has seen the worst of it" and will stabilize in 2013, says CMHC senior market analyst Shaun Hildebrand. A combination of tighter qualification rules for insured mortgages and a retreat by investors has slowed the condo market. All the recent bad press hasn't helped.
Hildebrand's analysis shows condo prices will experience only a mild correction in the near term and that economic fundamentals and demographics point to a stable condo market going forward.
Hildebrand says there is about 4.5 months of supply for resale condos, creating a buyer's market. While he does not expect a strong Spring market in 2013, by the second half of the year Hildebrand believes prices may start going up. The strongest communities will be Mississauga and Scarborough, followed by downtown Toronto and North York, Etobicoke and York markets may be slowest to rebound. Further, he says there is a misconception that foreign investors own many of the region's condos. In fact, non-Canadians own just 3.7% of GTA condos, and recent immigrants own many of those units.
51% of GTA households have 2-people or less and 1-person households grew by 15% from 2006 to 2011. These are the people who continue to find condos an attractive option.
The average condo price in the GTA is about $325,000.
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