Low likelihood of a serious price correction in Ontario: CMHC
Canada Mortgage and Housing Corporation (CMHC) released today its latest Housing Market Insight (HMI) report on Ontario's home price trends and whether the province is currently in a corrective or price bust phase. CMHC used fundamental and technical approaches to analyse historical house price movements to detect future home price vulnerabilities in Ontario.
The combination of the level of overvaluation easing in Toronto, growing employment and income rates, new households formed, and only moderate increases in interest rates, has led to a low likelihood of a serious price correction in Ontario, relative to historical bust periods.
- The combination of stronger government spending and moderate interest rate increases suggests the Ontario and GTA economies are expected to grow more moderately but to continue to provide underlying support for provincial real estate prices in 2018 and 2019.
- The type of homes expected to sell will also shape the behaviour of future prices as fewer single family home sales in the mix of all homes sold will restrain overall price appreciation. This will be particularly true in more expensive markets such as Toronto and Hamilton.
- Ontario home prices will continue to grow but at a more moderate pace that is more in line with the rate of inflation. However, our updated forecast expects prices to grow slightly higher than what was reported in our Fall 2017 Housing Market Outlook due to somewhat stronger than expected job creation and in-migration.
- For prospective buyers, the presence of balanced markets and easing of speculative behaviour will allow for more informed decision making, leading to fewer bidding wars and less urgency to act.
- For homeowners, home price expectations may take some time to normalize, which could lead to homes staying on the market longer than usual.
"The current home price correction in Ontario will likely not persist as it fails to resemble the more serious downturns observed in the past. While imbalances continue to persist, they are easing and fundamentals such as employment, growth in new households and slightly higher interest rates will support home prices."
— Ted Tsiakopoulos, Ontario Regional Economist, Canada Mortgage and Housing Corporation
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