Economist Benjamin Tal of CIBC World Markets shared that unless housing preferences and policies change, then the Vancouver and Toronto housing markets will continue to rise as increasing demand and tight supply put more pressure in said markets.
Transition Period
The economist also said that the Canadian housing market is currently in an important transition period, with Vancouver and Toronto being in the midst of it. He also stated that the market is likely to stabilize with activity and perhaps even soften as it adjusts to upcoming and recent regulatory changes, which included stricter rules for those wanting to get a mortgage.
Tal further said that conditions will be a lot tougher in the future if the trajectories continue and that it is just a matter of time before this becomes clear to everyone. He added that main centres such as Vancouver and Toronto are more vulnerable to this more so that he thinks the demand for housing in these areas are routinely understated. Is this a real certainty? Tal believes so. At least until some significant changes are implemented in housing preferences and policies because those may change where things are headed as of now.
Government Tries to Cool Down Markets
Housing prices are still rising in dramatic percentages all over Vancouver and Toronto, prompting the government to try to cool down the markets by introducing measures such as Vancouver’s 15% foreign buyers’ tax implemented in August 2016. This action brought in a period of adjustment, with the Vancouver market looking like it has now entered a period of recovery.
Meanwhile in Toronto, the Ontario government introduced the Fair Housing Plan which resulted in signs of slow down and a rebound. Proof is that the number of homes sold in September according to the Toronto Real Estate Board’s numbers is 27% less than the figures for September 2016.
How Demand is Changing
Tal mentioned in his report that a demand is expected to slow down by just 5% to 7% in view of newly introduced stricter lending rules. He added that this may be due to exceptions to the rule, creative borrowers, and increased involvement of alternative lenders.
He also mentioned that the actual housing demand is stronger than official estimates more so that Canada’s immigration quota is meant to rise to 300,000 from 250,000 and will eventually go to 450,000. Imagine how this will play out with how tight the current situation is.
It is to be noted that GTA’s official estimates are actually 10,000 below the real numbers. This is because non-permanent residents and immigrants were not really considered largely due to their younger average age compared to the general adult population. There’s another 9,000 unaccounted for estimates from young adults who are likely to seek having their own place soon.
The good thing about this is that with the above projected higher demand in the near future, then homes will continue to have an increased value. Yes, there is no projected price decline in the next few years.
Interested to know about how this can affect your plans to get a home loan or a second mortgage? Contact us and we’ll discuss it with you!