The cooling effects of Ontario’s housing plan will only last three to six more months, but don’t expect home prices to start surging by 30 per cent annually again, Central 1 credit union suggests in a report.
“Toronto and areas within the Greater Golden Horseshoe region have experienced the brunt of the housing shock with relatively more stable conditions elsewhere in Ontario,” says Bryan Yu, chief economist at Central 1, in a news release.
“This abrupt market shift will prove temporary, but a rebound in sales and prices will prove temporary, but a rebound in sales and prices will be gradual and won’t get back to highs hit earlier this year,” he continues.
In accessing the near-term future of the housing market in the Greater Golden Horseshoe, a large swath of southern Ontario including the Greater Toronto Area, Central 1 points to Metro Vancouver’s reaction to BC’s own foreign-buyer tax, which came into effect in August 2016.
“Sales and prices in Metro Vancouver have recovered to pre-tax levels after an initial three-to-six month softening,” the Central 1 report reads.
“While that rebound was aided by a provincial down payment purchase plan, and detached home sales are still being impacted, the impact of the tax has been temporary with a strong regional economy and low interest rates contributing to a return to strength,” Central 1 adds in the report.
However, because Ontario announced the foreign-homebuyer tax as part of a broader, 16-point plan that also features expanded rent control, Central 1 forecasts the GTA’s recover will be more muted.
“Other factors in play include rising interest rates and prospects of further federal regulatory tightening,” the report continues.
Central 1 predicts Ontario home sales, including new and resale dwellings, will total 296,800 units this year, down 8 per cent from 2016. Sales will erode another 2 per cent in 2018, the credit rating agency expects.
A total of 115,000 of the home sales recorded in the province this year will be in the Toronto census metro area. While that represents a drop of 19.5 per cent from 2016, activity will regain its footing in the following years with smaller fall of 8.7 per cent in 2018 and a surge of 14.3 per cent in 2019.
Meantime, the median price for a home in the province is expected to reach $410,000, an increase of 7.7 per cent over last year. A decline of 1.2 per cent in 2018 will be followed by growth of 6 per cent in 2019.
For Toronto in particular, Central 1 anticipates the median home price will finish the year at $630,000, having surged 12.9 per cent compared to the previous year. After dropped 1.9 per cent in 2018, Central 1 is calling for the median Toronto home price to vault 4.9 per cent.
“This current downcycle is not a major market crash or housing recession, but rather a policy- induced correction in conjunction with deteriora- tion in buyer affordability, following strong price gains in 2016 and early 2017,” according to Central 1.