The worst-case scenario for the Greater Toronto Area’s housing market in 2016 is one in which annual home sales reach their second-highest level on record, the Toronto Real Estate Board (TREB) predicts.
In its market outlook for this year, the board, the largest of its type in the country, forecasts home sales across the GTA this year to clock in between 96,500 and 105,000.
The top-tier estimate surpasses the 101,299 homes that changed hands through TREB’s MLS system in 2015, the best year for GTA home sales yet.
But even the low-level prediction is enough to best 2007’s sales tally of 93,193, the second-highest number of GTA homes to change hands in a calendar year.
TREB said the GTA will continue to be a seller’s market this year. Demand for homes in the area will push the average sale price of a dwelling to somewhere between $655,000 and $665,000, the board forecasts.
“Whether we see the second best year on record or a second consecutive record year will largely depend on the direction of borrow costs and the availability of listings, particularly in the low-rise market segments,” Jason Mercer, TREB’s market analysis director, said in a statement.
The Bank of Canada will make its next key interest rate announcement on Wednesday. A number of market observers expect the central bank will cut the overnight rate, which affects mortgage rates, by 25 basis points.
Whatever approach the central bank takes towards monetary policy, TREB expects low mortgage rates will continue supporting home sales through 2016.
“While the current market consensus is calling for a modest increase in borrowing costs over the next year, slower than expected growth in the Canadian economy could result in similar, or even lower, mortgage rates compared to 2015,” TREB said in its 2016 outlook.
Meantime, Canada Mortgage and Housing Corporation (CMHC) lending regulations taking effect next month won’t have a widespread impact on GTA home sales, according to the board.
Among the rule changes, the down minimum payment on government-insured mortgages will be increased to 10 per cent, up from the 5 per cent required previously, for the portion of a loan falling between $500,000 and a million dollars.
Though this move was geared at cooling hot markets like Toronto and Vancouver, where average home prices are over half a million, TREB said just a small share of buyers would be affected.
“Nine per cent of buyers who said they intended on purchasing a home for more than $500,000 and less than $700,000 planned on putting between five and 9.9 per cent down,” said TREB, citing results from a survey of potential homebuyers it commissioned Ipsos to perform before CMHC announced the new rules.
The low Canadian dollar, which may further encourage foreign investment in Toronto and Vancouver as stateside buyers take advantage of the exchange rate, should also boost exports for the same reason, leading to more jobs — a key component for stoking home sales — in the GTA, stated TREB.
“Positive economic conditions in the GTA, both over the past year and moving forward, will help keep consumer confidence strong,” TREB explained, adding, “consumer confidence is key to purchasing a large ticket item like a house.”
