Ontario housing sales to rise 5 per cent in 2011, house prices increase to an average of $356,500, Central 1 predicts.
Ontario house sales will increase by about 5 per cent next year and prices will hit new records, predicts a new forecast by Central 1 Credit Union released today. The strong market will spur new home builders to increase housing starts by 9 per cent to 66,000 in 2011 and another 7 per cent in 2012, says Helmut Pastrick, chief economist with Central 1.
“In spite of the increases new home construction will remain modest compared to the last decade and there may be an undersupply of new homes by the end of 2012,” Pastrick says.
MLS® housing sales fell to an annualized rate of 155,000 units last July and have climbed since, helped by low mortgage rates, improved affordability and an improving economy. Central 1 expects sales to continue to grow early in 2011 to an annualized rate of 210,000, before tailing off in the second half as mortgage rates rise.
The forecast is for sales this year to reach 194,000 units, down 0.9 per cent from 2009, rise to 204,000 units in 2011 but fall 3 per cent to 197,000 units in 2012. Prices will continue their upward trend, hitting $342,100 this year, $356,500 in 2011 and $365,000 in 2012.
Ontario housing starts increased dramatically last spring before trailing off towards the end of the year, and are expected to reach 61,000 for 2010, a 21 per cent increase over 2009, but that total will be the second lowest since 1998. In 2011 builders will start 66,000 units, up 9 per cent, and starts will increase a further 7 per cent in 2012 to 70,700 units.
But starts will be below the pace of new household formation so a housing shortage will put pressure on resale home prices, providing an incentive for builders to start 80,000 units in 2013.
The vacancy rate for apartments will be flat in 2011 at 3.7 per cent, but will decline to 3 per cent in 2012. “High youth unemployment has meant more young people are living at home, or sharing accommodation, which has pushed the vacancy rate up,” Pastrick says.
Mortgage rates are predicted to increase slowly in 2011 from an average of 5.40 per cent in the first quarter to 6.50 per cent by the fourth quarter of 2012, as the Bank of Canada slowly increases its policy rate.
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