Friday, November 16, 2012

Housing Market Outlook Q4 2012


New Housing Market outlook is out and there are not too many surprises. We peaked in Q2 of 2012 and the rest of the year is expected to be slow, but steaddy

In the first half of 2012, the level of new listings increased, leading to the emergence of balanced market conditions by the second quarter of 2012. However, the growth of new listings is expected to moderate over the second half of 2012, in response to moderating price growth, and to stabilize in 2013

MLS® sales are forecast to essentially hold steady in 2012 before moving slightly higher in 2013 due to employment growth and low interest rates. For 2012, MLS® sales are expected to be between 449,200 and 465,600 units. In 2013, MLS® sales are expected to be between 433,300 and 489,700 units.

Ontario housing demand is expected to have peaked during the second quarter of 2012 and to moderate over the forecast horizon. Total starts will reach 77,600 units in 2012 before moderating to 65,000 units in 2013. Modest job growth relative to the recent past, better supplied resale markets and a high level of new units under construction are expected to pull Ontario home starts back.

Heightened global uncertainty is expected to dampen business investment and job creation to levels below historical norms over most of the forecast horizon. Low average job growth will continue to hold back consumer spending. However, some leading indicators suggest that the US consumer is starting to spend with both housing and vehicles sales trending higher in recent months. Based on historical data, Ontario’s south western and northern Ontario economies are most responsive to this positive change in these US industries.

A widening economic growth gap between Ontario and the rest of Canada suggests Ontario will continue to lose migrants to other provinces in the short term. However, international migration will provide some support to Ontario population growth.


Key Factors and their Effects on Housing Market Activity

Mortgage Rates 

Short-term mortgage rates and variable mortgage rates are expected to remain near historically low levels, which will help support housing demand. The outlook’s base case also assumes that mortgage rates will remain flat in 2012 and rise modestly in 2013.

Employment

In the 12 months to September 2012, employment grew by 1.0 per cent (+174,500), while the unemployment rate stood at 7.4 per cent. Over this period, full-time employment rose 1.1 per cent (+156,800), and part-time rose 0.5 per cent (+17,700). Employment is forecast to grow 1.1 per cent in 2012 and 1.9 per cent in 2013, which will support Canada’s housing sector.

Vacancy Rates

Vacancy rates across Canada’s metropolitan centres are expected to hold steady at 2.2 per cent in 2012 before declining to 2.0 per cent in 2013, reflecting expectations of modest purpose-built rental construction and strong rental demand due to high immigration. Low vacancy rates are expected to help support the multiple starts housing segment, through expansion of the rented condominium market.

Changes to Mortage Insurance Rules

The recent measures for government-backed mortgage insurance will help ensure the sustainability of housing market activity and help stabilize house price growth. New measures announced for government-backed mortgage insurance will moderate housing activity. Some potential buyers will have to save a larger down payment to offset shorter amortization periods and thus postpone their purchase or consider a less expensive home.

Stock of New and Unoccupied Units

The stock of unoccupied new housing units has been stable in 2012, indicating continued strength in demand for newly completed homes. In addition, the ratio of the stock of unoccupied new units to population, a simple gauge to assess potential over-building, is close to the historical average. Should the inventory increase inordinately, builders may delay or reduce the size of some housing projects. This could lead to a sharper-than-expected moderation.

Read full report

1 comment:

  1. Thanks for such a great article to share with. Before diving into an investment, there are several things to consider and those information would really help.

    Condo Market

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