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Toronto Real Estate Market Outlook for 2014Submitted by Jasmina on Tue, 2014-01-14 19:54.
GTA Housing Market Forecast according to TREBToronto Real Estate Board's senior manager Jason Mercer discusses the current Greater Toronto Area housing market as of the third quarter of 2013. I find that general public normally does not 100% trust reports form Realtors (because they see them as a ”bait” to start trading Real Estate), but this particular presentation is one of the most thorough and well though through reports from Real Estate community that I have seen! That’s why I took the time to prepare Jason’s presentation highlights for you to see. Feel free to contact me or my husband Daniel, if you have any questions whatsoever! Q3 2013 presentation highlightsOverall Home Sales in the Greater Toronto AreaThe housing market is held up quite well despite some real and perceived head winds including stricter Mortgage Lending Guidelines and an up-tick in borrowing cost. In the past presentations, we talked about 2013 being sort of a tale of two halves with the first half of the year seeing sales down on the year over year basis, but then a rebound in the second half. In fact, we saw a stronger rebound than expected, that we have upgraded our forecast to a certain degree. We will see overall calendar year 2013 sales above 2012 levels and we expect to further increase as we move through 2014. Now with that said, it’s important to put calendar year sales in the longer term context: Toronto MLS Sales below Long-term TrendsAnd that’s what we can look at with this slide here where we’re comparing the long term trend (the green line) where we’re looking at historic sales per capita over time, versus the actual sale that have been reported through the Toronto MLS system (that’s the purple line): Months of Inventory - a.k.a. Absorption RateNow, let’s move from our discussion of sales to discussion of price. Of course price is a function of both demand and supply in the marketplace. We’ve talked about demand in terms of sales but of course we have to look at the relationship between sales and listings and see how that feeds through into price growth. A good measure when we are talking about that demand supply relationship is Months of Inventory. So in essence we are taking active listings at the end of a given month and divide it up by sales in that same month. What we are saying here is that if we didn’t see any more listings coming to the market, how long would it take to sell the current inventory, given the current level of the sales. We look at this indicator over time to determine whether or not the market is tightening or becoming more balanced. Toronto Real Estate Price Forecast
So when you put both those market segments together and we can come up with what we think is a reasonable price forecast over the next couple of years. Certainly driven by the Low-Rise segments of the market, 2013 calendar year price will come in at about $522,000 on average. That will represent about a 5% of increase year over year. Moving it to 2014 we expect market traditions to remain reasonably tight and that’s why it’s forecast in an average price of about $540,000.
Underlying Economic FactorsNow with sort of a broad view of sales and price complete, it’s important now to turn to the underlying drivers of the market and there’s probably no driver more important than borrowing cost. Certainly since this summer, we have seen interest rates start to edge upwards especially when we’re talking about longer term borrowing products like a 5-year mortgage which is based upon the yield for a 5-year Government of Canada Bond:
![]() This suggests that we won’t see much in the way of interest rates until the first part of 2015. So with that said, what’s the outlook for mortgage rates? Outlook for the Mortgage Rates
But it is important to note that there’s still going to be a lot of room for discounting in the market place as well. A home buyer with good credit visiting their lender to get pre-approval will likely be able to take on mortgage for a substantially lower rate than posted as we move forward through the end of next year. So that’s borrowing cost covered off, but it’s also important to think about consumer confidence. Consumer Confidence & Job MarketOne of the key drivers of consumer confidence is the labor market. If you’re looking to make a big ticket purchase for example on a house or a car you’re going to be thinking about:
![]() We are sitting right around the 20-year average so it make sense then that looking forward through the end of 2014 it will continue to see income growth probably in and around the rate of inflation. The market isn‘t tight enough to see a sustained above inflation increase in incomes but at the same time sitting right on that 20-year average it says a somewhat of balanced labor market and income increases right and around the inflationary mark. So that wraps up our outlook for sales and price and we’ve also considered the underlying drivers. So it’s important to put that all together and think about affordability for home ownership in the Greater Toronto Area. Housing Affordability Remains in Check in the GTA
At the Toronto Real Estate Board we measure affordability by calculating what percentage of the gross household income or average gross household income is going towards mortgage principle and interest, property taxes, and utilities. Right now, even with relatively strong price increase and a slight uptick in borrowing cost in the second half of the year we’re still seeing that share ranging in around 32% to 33%: And so with the broader overview complete, I want to switch gears and talk about the condominium apartment market in the GTA. Condominium Apartment Market in the Greater Toronto AreaNow the Toronto Real Estate Board has just released its 3rd quarter condominium report and rental market report, so we can use some statistics from these reports to sort of think about how that market has progressed over the last year or so. First off, I want to start with the ownership market. We talked earlier about how months of inventory we have been at or near historic highs because of added supply in the market place as projects have completed. But even while that is happened we have continued to see prices hold up.
Whether you’re looking at the Average Condominium Apartment Price or MLS HPI (Home Price Index) Apartment Benchmark you’ve seen that those price trends flat, even slightly up in the 3rd quarter of this year and that’s because we have continued to see enough demand - relative to the increase supply, to provide a foundation for pricing:
Investors & Renters
Now if we look at the rental market, things have actually been very, very tight:
So with that, that wraps up our update for 2013 and our Outlook for 2014. Thank you! printer friendly version |
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