Housing Market Outlook GTAF all 2010Document Transcript
H o u s i n g M a r k e t I n f o r m a t i o n HOUSING MARKET OUTLOOK Greater Toronto AreaCanada Mortgage and Housing Corporation Table of ContentsDate Released: Fall 2010 1 Market at a GlanceMarket at a Glance MLS® sales and selling prices in the GTA will stabilize and gradually increase 2 Resale Market over the course of next year. In comparison to 2010, the totals for 2011 will be slightly lower due to very strong activity in the first part of this year. MLS 3 New Home Market sales will reach 81,500, while the average selling price for the year will be approximately $428,000. New homes sales will total 26,500 units in 2011, with high rise projects 4 Local Economy accounting for the majority share of transactions (55 per cent). Total housing starts will remain at virtually the same level as 2010 (approximately 30,000) as strong apartment starts offset a decline in single detached construction. 5 Forecast Summary The unemployment rate in Toronto will edge lower but remain elevated next year. As a result, incomes will continue to grow below the rate of inflation. Figure 1 Higher Apartment Starts Next Year 1 60,000 Apartments Housing Starts, GTA 45,000 Singles, Semis and Rows 30,000 SUBSCRIBE NOW! Access CMHC’s Market Analysis 15,000 15 000 Centre publications quickly and conveniently on the Order Desk at www.cmhc.ca/housingmarketinformation. 0 View, print, download or subscribe to get market information e-mailed to 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010F you on the day it is released. CMHC’s Source: CMHC electronic suite of national standardized products is available for free.1 The forecasts included in this document are based on information available as of October 8, 2010. Housing market intelligence you can count on
Housing Market Outlook - Greater Toronto Area - Date Released: Fall 2010 Figure 2 years. This will impact sales coming 1 MLS® Sales Will Remain Stable from first-time buyers, who typically 100,000 have below-average incomes and savings. 95,164 89,255 86,000 While overall sales levels and 85,672 84,854 84,842MLS® Sales, GTA 81,500 75,000 79,366 price growth will be lower than 76,387 74,759 in the preceding couple of years, 67,612 opportunities for growth will continue 58,957 58,841 58,349 58,283 55,360 50,000 to present themselves in 2011. Next ,280 year, the share of the population in 48, their prime income earning years 25,000 (45-54) will peak — meaning the 1995 1997 1999 2001 2003 2005 2007 2009 2011F reduction in first-time buyers should Source: CREA, CMHC Forecast be at least partially offset by greater sales from move-up buyers. As a result,Resale Market reflects a rebalancing from record above-average priced areas of the GTA levels set in the early part of 2010. should continue to attract interest inLess excitement in store for Homeownership demand is expected 2011. The empty-nester and retiree2011 to gain momentum in the second half population is also expanding quickly, of next year as the GTA economy as is the trend towards downsizing.The Greater Toronto Area’s resale is now starting to bring full-time Results from CMHC’s Renovationmarket is expected to normalize in employment beyond the pre-recession and Home Purchase Report indicate2011. After an unprecedented level of peak (see Local Economy section). that 40 per cent of home purchasersvolatility experienced over the past Continued low interest rates will keep aged 65 plus bought a condo. A largecouple of years, sales will settle into households interested in buying, but number of newly completed unitsa range reminiscent of the 2003-2006 won’t lead sales to new highs. Prices hitting the market will present buyersperiod — decent volumes without in the resale market are no longer at with ample choice and more flexibledramatic movements. One change stimulative levels after growing faster prices. Research conducted by CMHCon the horizon is an absence of the than incomes over the past couple reveals that one-third of the 20,000seller’s market conditions the GTAhas been accustomed to for much Figure 3of the past decade. Buyers can sigh MLS® Average Prices Will Flatten 1in relief as prices will see very littlemovement from today’s levels. While $450 Avg MLS® Selling Price, GTAdevelopments in the housing market asonally Adjusted, $000s)will likely attract fewer headlines in the $400coming year, take that as a sign thatwe have transitioned towards a more $350sustainable level of activity reflective ofthe current economic environment. $300In fact, the market already appears $250 (Sea gto be settling into its comfort zone.Sales are currently in the low end of $200the 75,000 to 85,000 annualized range 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011Fexpected for the rest of this year Source: CREA, CMHC Forecastand throughout 2011, which largely Canada Mortgage and Housing Corporation 2
Housing Market Outlook - Greater Toronto Area - Date Released: Fall 2010units registered in 2009 and the Figure 4first half of 2010 were listed for sale New Home Sales Will Favour High Rise 1during the period. Prices for these 40,000recently finished suites are comparable 38,397to prices at pre-construction sales GTA New Home Sales Low-Rise High-Risecentres, allowing buyers with more 30,000 30,824 30,775 29,935options to buy “new” without the long 27,177 24,215construction wait. While first-time 22,422 20,000 21,518 21,235buyers will likely look more towards 18,313 17,392 17,043 16,500 15,637 15,263the condo market next year, they also 14,583 14,500 14,500 13,235 2,264 10,000 2,000 11,549 ,757tend to broaden their geographic 207 G 12 10,2 12 1 10,scope when ownership becomes lessaffordable. Sales in areas close to the 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011Fcity yet offering prices 10-20% belowthe GTA average, such as Pickering, Source: RealNet Canada Inc. (www.realnet.ca); CMHC ForecastAjax, Whitby, northern Mississauga andBrampton, are expected to perform equivalent number of completions. In market remains competitive withrelatively better next year. a way, the high level of completions resale listings. Furthermore, limiting will help builders by freeing up the number of new launches to reflectNew Home Market resources to begin construction on a slower sales environment will new projects. In another sense, more prevent an over supply situation andMore challenges await next finished units will mean more resale prolonged project absorption periods.year listings, which will compete withA relatively weaker outlook for new builders’ unsold inventory of units. Developers of low rise homes willhomes sales is expected in 2011. New condo sales are expected to face the same challenge as their highThe new home market typically give up share to the resale market, rise counterparts in attempting toexperiences more pronounced as buyers take advantage of the effectively compete with the resaledeclines than the resale market when increased selection and improved market and keep a lid on price growth.conditions soften. Resale volumes negotiation power for existing units. However, the main obstacle faced incan derive some stability from the While developers of new condos have the low rise market is on the supplyturnover of a large and growing stock, less flexibility in adjusting prices due side — the number of units currentlywhereas the new home market has to to construction costs and agreements available to build is half the level in therely on its more limited offerings to with lenders, this doesn’t presume high rise market. Reduced supply thatattract buyers. A decade low number that prices will continue to grow at is largely located in the higher pricedof transactions for low rise homes 5-10 per cent annual rates. In fact, York Region will lead to further gainswill be recorded (12,000), while high the growing gap between prices for in new home prices next year, evenrise sales will range between levels new unsold product and selling prices with lower sales levels. Two-thirdsreached in the 2002-2004 period, in the resale market should require of the low rise units for sale in thetotalling 14,500 in 2011. One area of an adjustment in inventory. Builders GTA are single detached homes withgrowth in the new home market next will need to focus on keeping first- average prices approaching $600,000.year will be the construction of high time buyers and long-term investors However, by shifting focus to morerise units, which will see starts rise by interested by launching smaller- affordable areas with greater landnearly 30 per cent thanks to strong sized and more affordable units, as supply as well as smaller and lesscondo sales in late 2009-early 2010. well as opening more sales sites in expensive homes, price pressures less expensive areas outside of the should be contained to around theThe elevated level of high rise starts downtown core. Tempering growth rate of inflation. Single detached startsnext year will be matched by an in new condo prices will ensure the will decline markedly next year, but Canada Mortgage and Housing Corporation 3
Housing Market Outlook - Greater Toronto Area - Date Released: Fall 2010expect activity to move more into the continue to expand as immigrants of employment above previous highs.Durham Region — currently offering flow into the area and net migration However, growth will be tepid andabout one-third of the GTA’s inventory rises, while the sectors that have considerable slack will remain in theof singles ready to build. Builders will provided pillars of strength for job labour market, translating into modestalso turn their attention more towards creation are expected to scale back growth in housing sales in the secondthe construction of row homes, which hiring next year. A slower housing half of next year.will represent one-third of low rise market will reduce hiring in the realhousing starts in 2011. estate services and construction Mortgage rate outlook industry, and a downgraded outlook According to CMHC’s base caseLocal Economy for global demand will keep corporate profits below peak levels, limiting job scenario, posted mortgage rates will re-Slow road ahead openings in the manufacturing and main flat in the second half of 2010 and in 2011. For 2010, the one-year posted financial sectors. Furthermore, theThe relatively quick turnaround for mortgage rate is assumed to be in the reduced share of full-time jobs shouldemployment will be a stabilizing factor 3.0 to 3.7 per cent range, while three show little improvement next year asfor housing sales and construction and five-year posted mortgage rates employers continue to exhibit caution are forecast to be in the 3.2 to 6.1in 2011. However, digging beneath by hiring more part-time workers per cent range. For 2011, the one-yearthe headline job recovery reveals a and adding hours back to existing posted mortgage rate is assumed beToronto labour market not yet ready full-time positions. As a result, wage in the 2.7 to 3.7 per cent range, whileto bring housing activity back near growth will remain below the rate of three and five-year posted mortgagepeak levels. Since developments in the inflation. All told, job creation over the rates are forecast to be in the 3.5 tolabour market typically impact the next six months will bring the level 6.0 per cent range.housing market six-to-nine monthsdown the road, it is important to Figure 5understand current developments Toronto Unemployment Rate Will Edge Lower 1and the near-term outlook forthe employment situation to set 12 Toronto Unemployment Rateexpectations for the market in 2011. 10Although employment has now (Per Cent) 8returned to its pre-recession level(Q3 2008), the number of people 6looking for work has shown unabatedgrowth over the past two years. As 4 Ta result, unemployment remains high 2and only a slight decline in the joblessrate is expected next year — which 0will stay well above the average for 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011F Source: Statistics Canada, CMHCthe past decade. The labour force will Canada Mortgage and Housing Corporation 4
Housing Market Outlook - Greater Toronto Area - Date Released: Fall 2010 Forecast Summary Toronto CMA Fall 2010 2007 2008 2009 2010f % chg 2011f % chgResale MarketMLS® Sales 95,164 76,387 89,255 86,000 -3.6 81,500 -5.2MLS® New Listings 155,093 163,169 136,096 156,000 14.6 146,000 -6.4MLS® Average Price ($) 377,029 379,943 396,154 429,300 8.4 427,700 -0.4New Home MarketStarts: Single-Detached 14,769 11,308 8,130 9,850 21.2 6,500 -34.0 Multiples 18,524 30,904 17,819 19,900 11.7 23,100 16.1 Semi-Detached 2,864 2,362 2,032 1,700 -16.3 1,600 -5.9 Row/Townhouse 5,280 4,612 2,918 4,700 61.1 4,200 -10.6 Apartments 10,380 23,930 12,869 13,500 4.9 17,300 28.1 Starts - Total 33,293 42,212 25,949 29,750 14.6 29,600 -0.5Average Price ($): Single-Detached 515,325 540,560 582,123 605,500 4.0 617,600 2.0Median Price ($): Single-Detached g 446,990 , 480,900 , 496,945 , 519,300 , 4.5 532,300 , 2.5New Housing Price Index (1997=100) (Toronto-Oshawa) 2.7 3.5 -0.1 2.9 2.0Rental MarketOctober Vacancy Rate (%) 3.2 2.0 3.1 3.2 0.1 2.9 -0.3Two-bedroom Average Rent (October) ($) 1,061 1,095 1,096 1,104 - 1,117 -Economic OverviewMortgage Rate (1 year) (%) 6.90 6.70 4.02 3.47 - 3.20 -Mortgage Rate (5 year) (%) 7.07 7.06 5.63 5.59 - 5.20 -Annual Employment Level 2,865,500 2,922,800 2,890,500 2,964,000 2.5 3,041,000 2.6Employment Growth (%) 2.3 2.0 -1.1 2.5 - 2.6 -Unemployment rate (%) 6.8 6.9 9.4 9.3 - 9.0 -Net Migration 61,058 63,102 58,419 63,500 8.7 69,000 8.7MLS® is a registered trademark of the Canadian Real Estate Association (CREA).Source: CMHC (Starts and Completions Survey, Market Absorption Survey), adapted from Statistics Canada (CANSIM), CREA, Statistics Canada (CANSIM)NOTE: Rental universe = Privately initiated rental apartment structures of three units and over Canada Mortgage and Housing Corporation 5
Housing Market Outlook - Greater Toronto Area - Date Released: Fall 2010 Forecast Summary Oshawa CMA Fall 2010 2007 2008 2009 2010f % chg 2011f % chgResale MarketMLS® Sales 10,217 8,797 9,328 9,200 -1.4 8,650 -6.0MLS® New Listings 17,153 18,574 13,485 17,000 26.1 16,800 -1.2MLS® Average Price ($) 265,620 272,429 278,505 299,500 7.5 297,500 -0.7New Home MarketStarts: Single-Detached 1,747 1,500 836 1,440 72.2 1,040 -27.8 Multiples 642 487 144 310 115.3 406 31.0 Starts - Total 2,389 1,987 980 1,750 78.6 1,446 -17.4Rental MarketOctober Vacancy Rate (%) 3.7 4.2 4.2 4.1 -0.1 3.8 -0.3Two-bedroom Average Rent (October) ($) 877 889 900 917 - 935 -Economic OverviewMortgage Rate (1 year) (%) 6.90 6.70 4.02 3.47 - 3.20 -Mortgage Rate (5 year) (%) 7.07 7.06 5.63 5.59 - 5.20 -Annual Employment Level 181,500 186,100 179,500 188,200 4.8 189,700 0.8Employment Growth (%) 2.4 2.5 -3.5 4.8 - 0.8 -Unemployment rate (%) 6.2 7.1 9.0 10.3 - 9.9 -MLS® is a registered trademark of the Canadian Real Estate Association (CREA).Source: CMHC (Starts and Completions Survey, Market Absorption Survey), adapted from Statistics Canada (CANSIM), Toronto Real Estate Board,Statistics Canada (CANSIM)NOTE: Rental universe = Privately initiated rental apartment structures of three units and over Canada Mortgage and Housing Corporation 6
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