In its latest Housing Market Outlook for Greater Toronto Area, Canada Mortgage and Housing Corporation (CMHC) forecasts both resale and new home construction activity will reach high annual levels in 2012; however momentum will slow in the second half of the year and into 2013. full report
It predicts sales of existing homes will grow 3.5% this year but will decline 3.7% in 2013. Average price will grow 7.2% this year and 2.0% in 2013.
Although it remains a key driver of demand in the near term, CMHC says the stimulative effect of record-low interest rates will begin to fade.
Home price growth has been outpacing growth in income and employment. Economists agree that this trend cannot continue indefinitely. Higher home prices have made homes less affordable for many, especially first-time home buyers. Coupled with the newly implemented mortgage rules, the pool of potential buyers should reduce, putting downward pressure on price growth in the months ahead.
Single-family home price appears to have better upside potential than condos. Reduced land zoned for low density housing and infrastructure capacity limits will continue to restrain the number of new developments available to buyers, regardless of demand. This will result in fewer units being added to the resale market. Thus, growth in supply for single-family homes should remain limited and tight market should continue to support price growth, albeit at a slower pace.
Detached homes in Halton Hills, Brampton, Newmarket, the west end of Toronto, Scarborough, and Oshawa should outperform others. Prices in these areas are at considerable discounts in relation to neighbouring municipalities, offering the best relative value.
However, condo price growth in GTA will face stronger headwinds. Despite the price and location advantages, resale price growth for condos will be challenged by increasing supply pressure. Price appreciation has already slowed considerably this year – annual rates are half the levels recorded during the past two years. A big factor has been the increasing number of units listed for sale. As more projects are completed (approximately 18,000/year), there will be limited potential for condo prices to rise by more than inflation.