For the past few years, the state of the housing market in Halton (and other GTA municipalities) has gotten a great deal of attention.
According to the Toronto Real Estate Board, in Oakville, the average price of a detached house sits at $1,343,425. A semi costs about $$770,613, a town costs $596,562 and a condo costs $572,066.
In Burlington, the average price of a detached house sits at 1,048,952. A semi costs $699,250, a town costs 557,374 and a condo costs 494,802.
In Milton, the average price of a detached house sits at $955,745. A semi costs $723,511, a town costs $516,271 and a condo costs $502,667.
So, what can Canadian home buyers and sellers expect as we enter a new brand-new decade?
Real estate website and brokerage Zoocasa recently released its top five predictions for home sales, price growth, and mortgage rates in the new year.
1. Home Sales Will Continue to Recover from 2018 Slump
Zoocasa says that Canada’s housing market has come a long way from its 2016-2018 boom-bust cycle.
“After sustaining roughly two years of softer sales and price growth following the introduction of the federal mortgage stress test, as well as provincial taxes and policies in Ontario and British Columbia, demand for homes for sale found its footing in the second half of 2019,” the blog post reads.
Canada’s largest urban centres, such as the Greater Toronto Area, started to experience sustained rebounds in home buyer demand due to a number of factors, including lower interest rates.
Zoocasa says persistently low-interest rates have helped soften the blow of the stress test, which requires borrowers to qualify at rates higher than what they’ll ultimately be paying.
“Not only did an overall lower rate environment pull the Bank of Canada’s qualifying rate down to 5.19 per cent from 5.39 per cent in 2019, but all borrowers enjoyed deeply discounted fixed mortgage rates, which outpriced even their variable counterparts at some of the nation’s most competitive lenders.”
Zoocasa says this drove buyers back into the market, causing year-over-year sales and price growth to spike in most of Canada’s major cities.
Zoocasa says that according to several real estate analysts and associations, home buyers and sellers can expect this trend to extend well into 2020. In its most recently revised forecast, the Canadian Real Estate Association expects the year to close out with 486,800 transactions, up 6.2% from 2018, before climbing to 530,000 sales next year, at an increase of 8.9%. The national average home price is expected to climb 2.3% to $500,000, and up 6.2% to $531,000 in 2020.
This optimistic outlook is echoed by the Canada Mortgage and Housing Corporation.
“Overall, economic and demographic conditions will remain supportive of housing activity over the forecast horizon, halting the declines in starts, sales, and average home prices that followed the highs of 2016 – 2017,” it states in its most recent Housing Market Outlook.
Nation-wide, the CMHC expects 2020 sales to fall between 480,600 – 497,700 units, a year-over-year uptick of roughly 6 per cent. The average price will fall between $506,200 – $531,000, up 5.6 – 6.7 per cent from this year.
2. BC and Ontario Will Lead Housing Market Growth
This probably comes as no surprise.
Zoocasa predicts the strongest action will be seen in the Ontario and British Columbia markets, particularly in the latter as it recovers from a slew of foreign buyer and non-resident speculation taxes.
In the Ontario real estate market, sales will hit between 204,200 – 213,800 units (+4.2 – 7.3 per cent), with prices between $614,000 – $633,700 (+5.4 – 6.5 per cent).
3. It’ll Be a Sellers’ Market – Especially in the GTA
If you’re planning to purchase a home in 2020, you will face a challenging market.
Zoocasa points out that market conditions in Canada’s largest cities have been largely defined by a growing supply and demand gap (a lot of people want homes and there are simply not enough of them right now).
While investors/speculators have also contributed to price growth, the lack of inventory–particularly in the GTA markets–set the stage for bidding wars and a stratospheric rise in home values over the course of 2016. The surge in prices led to the implementation of the Ontario Fair Housing Plan, which included a foreign buyers’ tax and rent controls, to cool demand.
“For a time, these new policies were effective in chilling the market; combined with the federal mortgage stress test, the measures thoroughly spooked sellers, leading to a 33 per cent drop in new listings following their announcement. As well, home prices plunged across the province, with York Region bearing the brunt with double-digit declines,” Zoocasa writes.
While sales and prices have rebounded steadily over the past year, the same can’t be said for new listings. Zoocasa says Canadian real estate as a whole could be considered a sellers’ market in November.
Zoocasa says the total months of inventory – the length of time it would take to completely sell off all available homes for sale – currently sits at 4.7 months, its lowest level since 2007.
“However, recent reports out of the GTA show that lack of supply is a far more acute issue. The end-of-year numbers from the Toronto Real Estate Board reveal the sales-to-new-listings ratio for the region was 81 per cent, indicating just under 20 per cent of all new listings brought to market were sold in November.”
TREB’s analysts are raising concerns that should undersupply persist, prices could skyrocket once more.
4. Mortgage Rates Will Remain Cheap
Here’s some good news for buyers!
Zoocasa says The Bank of Canada (BoC) – the national central bank that sets the cost of borrowing for consumer lenders – has kept mortgage interest rates relatively low and stable for the entirety of 2019, keeping its trend-setting overnight lending rate at 1.75 per cent in each of its eight announcements. As a result, banks and credit unions were able to keep their variable mortgage and line of credit products competitively priced.
Zoocasa says that due to this, borrowers have had access to some of the lowest mortgage rates on record in 2019 – and this is likely to persist throughout the new year, according to the latest communications from the BoC.
5. It Might Get Easier to Qualify for a Mortgage
Zoocasa says that, in December, a letter from Prime Minister Justin Trudeau indicated Federal Finance Minister Bill Morneau will take a second look at the controversial stress test’s criteria, and potentially make tweaks to allow for more flexibility when qualifying borrowers.
“While no details have been released as of yet, this could include lowering the qualifying rate from its current 5.19 per cent, or making it more dynamic based on individual borrowers’ profiles, As well, they could remove the current requirement for borrowers to be re-stress tested when switching lenders, a measure that has drawn heavy criticism from the mortgage industry for discouraging consumer empowerment and competitiveness,” Zoocasa says.
Are you planning to buy a home in 2020?