Existing homes sales have increased since July 2010. On the other hand, new listings have not kept pace with existing home sales. As a consequence, the resale market has moved from balanced to sellers’ market conditions. As a result, the average price increased to $365,648 compared to $342,441 in the fourth quarter of 2010. For the remainder of 2011, the average price is expected to moderate but still increase (possibly up to $374,300 in 2011 and $385,000 in 2012).
In 2011, Ontario will experience a modest decline in housing starts. A recovering economy and improving employment situation will push Ontario starts up in 2012
In Ontario a recovering economy and improving employment situation will push province starts up, but not until 2012. As is the case for most other provinces, new construction growth is expected to slow in 2011. While less first time buyer demand and slightly higher interest rates will dampen housing activity, stronger full-time employment, income growth and in-migration will provide offsetting support for housing into 2012.
Mortgage rates
On April 12th, the Bank of Canada announced that it was leaving the Target for the Overnight Rate unchanged at 1.0 per cent. The last increase in the overnight rate occurred on September 8, 2010 when the Bank of Canada raised it by 25 basis points. Although the Bank of Canada is expected to resume raising the overnight rate in the fourth quarter of 2011, mortgage rates, particularly short term mortgage rates and variable mortgage rates are expected to remain at historically low levels. This will continue to support housing demand.According to CMHC’s base case scenario, posted mortgage rates will remain flat in 2011 before increasing moderately in 2012. Rates could, however, increase at a faster pace if the economy ends up recovering more quickly than presently anticipated.
Employment and income
Employment is forecast to improve along with overall economic conditions and increase by 1.6 per cent in 2011 and by 1.7 per cent in 2012. The unemployment rate is expected to decrease to 7.6 per cent in 2011 and about 7.2 per cent in 2012.The composition of employment growth is shifting from part-time employment to more full-time employment. Continued employment growth in 2011 and 2012 will support the housing market
Growth in incomes improved in 2010 because of the economic recovery and the resulting improvement in the labour market. Income will continue to grow at a modest pace in 2011 and 2012 and will positively affect housing demand.
Regulation
The Department of Finance introduced some adjustments to the rules for government-backed insured mortgages. These rules change will moderate housing activity, as some potential home buyers will have to save a larger down payment and thus postpone their purchase or consider a less expensive home.Vacancy rates
Modest rental construction and strong rental demand due to high immigration will be partly offset by increased competition from the condo market. As a result, vacancy rates across Canada’s metropolitan centres will remain relatively stable this year and next.Read full report
