Photo: James Bombales

New mortgage rules and the possibility of interest rate hikes could cause first-time buyers to rethink their dream of Toronto homeownership. According to a new report, many may consider buying in other cheaper Ontario markets in the new year.

“There’s likely going to be spillover in [other Ontario markets] as affordability becomes increasingly strained in markets like Toronto,” Scotiabank VP and deputy chief economist Brett House tells BuzzBuzzNews. “The market is healthier outside of the immediate area.”

That means that cities surrounding the GTA could see a boost in demand in 2018. “The strong fundamentals underpinning housing demand in the high priced Toronto…is spilling over to adjacent centres—Hamilton and Oshawa among others,” writes the Scotiabank economics team in a note released today.

Housing Market News Alerts

Sign up for news alerts on the Toronto housing market

According to the note, both Hamilton and Oshawa are likely to experience a surge of buyers in the new year.
“You’re going to see those who are priced out of [Toronto] looking to lower priced homes in nearby centres, as they react to [the new mortgage rules]” says House.

It’s a trend that could “definitely” happen, according to Canada Mortgage and Housing Corporation Hamilton and Brantford senior market analyst Anthony Passarelli.

“In Hamilton, the price of a detached home is still less expensive than a townhouse in Toronto,” Passarelli tells BuzzBuzzNews. “As long as that’s the case, I think you’re going to see first-time buyers coming to this market.”
Passarelli says that the higher borrowing costs will likely push prices higher in the area over the next few months.

“We’re predicting a pretty balanced market overall for 2018,” he says. “But prices are expected to rise slightly as GTA buyers come into the market.”

Buyers set on purchasing in the Toronto market do have some other options. As the Scotiabank economics team notes, buyers may opt for cheaper dwelling types, or for longer amortization periods.

“The overall impact on sales [of the new mortgage rules] is likely to be smaller, as some potential buyers may choose to purchase lower-priced homes, while others may be able to extend their amortization periods, make a larger down payment, or opt for a lower variable mortgage rate in order to extend their buying power,” writes the team.

Developments featured in this article

More Like This

Facebook Chatter