CMHC Housing Market Outlook
Greater Toronto Area
excerpt from the CMHC Spring 2010 Housing Market Outlook:
GTA Resale Market: Nearing a Turning Point
Read the full report here (pdf)
The resale market in the Greater
Toronto Area (GTA) will put an
exclamation point on 2010 with a
record level of activity this year. Sales
will reach six digits for the first time
and price growth will be well above
the historical average. This momentum,
however, is expected to wane in the
second half of the year. In fact, the
market will look quite different by
2011 as sales levels converge back to
their longer-term average and prices
show little movement. The era of rockbottom
mortgage rates is coming to
an end and the red hot GTA housing
market will begin to lose its steam.
A full year of record-low borrowing
costs has made first-time buyers out
of tens of thousands of renters and
parents’ basement dwellers in the
GTA. However, the primary source
of stimulus fuelling this increase in
homeownership is already beginning
to fade. Five-year mortgage rates
are on the move and will be a full
percentage point higher by the end
of the year. Combining higher rates
with the new reality of average prices
well above $400,000 will make the
transition to homeownership more
expensive. The erosion of affordability
will cause delay for many first-time
buyers, who have proactively
accelerated their purchasing decisions
and propped up sales temporarily.
Home sales in the GTA, however, are
not expected to decline dramatically
and will converge to the 10-year
average in 2011. More jobs, stronger
income growth and higher net
migration will provide support for
the market (see Local Economy
Section). Furthermore, demand from
current homeowners is expected
to pick up some of the slack left by
fi rst-time buyers. Owners feel the
timing is right to make a move as
prices for their current home climb
to new highs and financing costs for
their next purchase still remain low.
Also, price appreciation for detached
homes in some desirable areas in
the GTA hasn’t been as strong as the
rest of the market.
A higher presence
of move-up buyers will further
increase the appeal of established
neighbourhoods, which should see
above-average price growth in the
coming years due to their fixed level
of supply and relatively low level
of turnover. With move-up buyers
looking to enter the high end and
down-sizing baby boomers looking
for less maintenance and to liquidate
assets for retirement, a high level of
new listings will be a theme over the
next couple years.
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