Earlier this year, I voiced my disagreement with the real estate pessimists who said a real estate crash or bubble was forming. Click here to read more.
This same more positive outlook is backed up by CMHC’s latest Housing Market Insight report for Ontario courtesy of regional economist Ted Tsiakopoulos.
Below are some key highlights from CMHC’s report:
- The trajectory of Ontario home prices is important for economic and financial stability
- Current Ontario price correction doesn’t resemble more severe historical price bust periods
- Fundamental and technical indicators support prices growing in line with inflation in 2018/19
- Balanced markets mean stable home prices and less urgency to act among buyers
- Stable prices will result in more certainty for lenders, while requiring owners and investors to adjust price and return expectations
- About 40% of all Ontario household assets are tied up in a principal residence
Home prices to grow at more moderate pace
CMHC’s conventional quantitative models, which rely on supply and demand factors, suggest that prices will continue to grow… but at a more moderate pace and in line with the rate of inflation. A more benign growth in home prices will result from the continued persistence of overvaluation in some major markets in Ontario. Ontario average prices will range from $562,000 to $575,000 in 2018 and $570,000 to $595,000 in 2019.
Inflation-adjusted home prices in Ontario were in a recovery phase for almost two decades following the early 1990s recession. Furthermore, the current expansion in inflation-adjusted prices in Ontario was nine years in the making prior to the decline posted by the second quarter of 2017.
The likelihood of an imminent price bust period is currently low, as opposed to being moderate in early 2017.
While economic growth in Ontario is expected to slow in 2018 and 2019, employment and incomes will continue to grow, supporting housing prices.
Home prices more in line with inflation
Fundamental and technical approaches used in this study suggest that inflation-adjusted home prices in Ontario should remain relatively stable and close to fourth quarter 2017 levels.
In other words, nominal home prices should grow in line with the general rate of inflation throughout 2018/19. The current home price correction in Ontario will likely not persist as it fails to resemble the more serious downturns observed over time.
NAFTA and the US trade wars will impact our economy and housing market, but the full extent is not yet known. Having said that, there’s an old saying that suggests the best time to buy real estate was yesterday. The second best time is today!
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Steve Garganis: 416-224-0114; firstname.lastname@example.org
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.