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It doesn’t seem like Toronto home prices are going anywhere in the coming years, at least when inflation is taken into account.
Toronto home values are expected to appreciate roughly at the rate of inflation this year following 2018’s declines, a new forecast suggests — and the outlook for the following two years is even weaker.
According to Central 1 Credit Union’s new Ontario Housing Forecast 2019–2021, the median price of a Toronto home will reach $652,178, up just 3 percent from 2018.
Canada’s central bank sets 2 percent as its target for inflation, so if that policy goal is met it would mean Toronto home prices would virtually be flat on a year-over-year basis.
Prospects are grimmer for the next two years, with anticipated gains of 2.5 percent and 2 percent forecast for 2020 and 2021, respectively.
The performance is broadly in line with cooler market conditions prevailing across the province.
“With an increased number of buyers trying to bid down prices, fewer sellers are willing to sell or even list their homes,” writes Edgard Navarrete, a regional economist for Central 1.
By the year’s end, Central 1 suggests 118,000 residential properties will change hands throughout the Toronto region this year, an increase of 5.9 percent versus 2018, when sales plunged 15.9 percent on a year-over-year basis.
However, the pace of activity will slacken if the Central 1 forecast proves correct. Sales are expected to climb 3 percent in 2020 and 2.9 percent in 2021.
“Despite population growth being supportive of housing demand, Ontario’s homeownership markets will post modest numbers in 2019 to 2021,” he writes.
In the report, Navarrete provides a few reasons for the modest forecast.
“The sluggish economy and restrictive lending rules will affect the quantity, type and value of homes consumers will be able to purchase,” he explains.
Since January 2018, those hoping to take out an uninsured mortgage have been faced with a mortgage stress test that requires them to qualify at a rate that is either 200 basis points above their contract rate or the Bank of Canada’s benchmark rate, whichever is higher.
Previously, these homebuyers would have been able to sidestep a stress test as similar rules were limited to the insured mortgage segment, targeting borrowers who couldn’t cobble together downpayments of 20 percent or more.
“Restrictive mortgage lending rules and increased economic uncertainty, due to external pressures, will weigh on Ontarians’ shoulders in 2019 and beyond affecting many areas of the economy,” says Navarrete, who cites international trade negotiations as one pressure on the provincial economy.
