Photo: James Bomables
2017 was a year of rocketing highs and plunging lows for the Toronto real estate market. The new year promises to be a bit more balanced — but for how long?
“I think we’re going to see a perception problem in the market, at least for the first few months of the year,” Bullpen Research & Consulting president Ben Myers tells BuzzBuzzNews. “This time last year we were in a bubble — prices were in the $900,000s. We’re going to see comparisons year-over-year that are going to look really terrible, and people will think the market is tanking.”
Which it won’t be, according to Myers, though it will cool somewhat in the first few months of the year as the market adjusts to new mortgage rules.
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The rules — which came into effect on January 1 and consist of a new stress test for uninsured mortgage borrowers — come at a time when the Bank of Canada is widely expected to continue to hike the overnight rate throughout the year.
“The resale market is going to be fairly flat overall, and will likely stay within the $700,000 to $750,000 range on average,” says Myers. “The new mortgage rules will impact how much people can buy, and will push them down the property ladder.”
As for the new construction market? Myers predicts that pre-construction condos will continue to perform well, especially as first-time home buyers’ purchasing power is diminished by the new rules.
“New construction high rise is going to perform well, because investors are still bullish on Toronto,” says Myers. “Especially when you’re buying something in 2018 that is set for delivery in 2022.”
Zoocasa managing editor Penelope Graham agrees that prices in both the resale and new construction market will likely soften in the first few months of the year.
“I think we’re going to see a quieter part of 2018 as the new mortgage rules are absorbed,” she tells BuzzBuzzNews. “Most buyers and sellers are going to take a wait-and-see approach, at least for a little while.”
At the same time, Graham says that the market is unlikely to stay down for long.
“With the economic activity being what it is in the city, demand for housing will never go away,” says Graham. “Continued migration will put pressure on available market inventory — we’ve still got the classic supply-and-demand imbalance.”
Graham’s predictions are echoed by Royal LePage, in their recent House Price Survey. “Policy measures [like the new mortgage rules] will quell runaway housing inflation to an extent,” writes Royal LePage president and CEO Phil Soper. “However, we do forsee an upswing in demand in the latter portion of the year, as prospective buyers adjust to the new realities.”
Myers agrees that the end of the year will likely bring with it stronger sales, and a potential jump in prices. “Maybe it takes six months or nine months to adjust to this new lending environment, but as we’ve seen in the past, Toronto seems to adjust pretty quickly to new things,” he says.