Central 1 Credit Union

Central 1 Credit Union

June 04, 2012 05:00 ET

Central 1 Credit Union: Fundamentals Drive Toronto Housing Market Higher, Analysis Says

Fears of a Bubble Are Overblown, Economist Says

TORONTO, ONTARIO--(Marketwire - June 4, 2012) - Fears of a Toronto real estate bubble and resulting bust are overstated, says a new analysis by Central 1 Credit Union.

Central 1, the financial facility and trade association for most Ontario credit unions, expects Toronto's housing market to perform well through 2014 and generate moderate price gains.

"I believe economic and population growth, growing consumer confidence, and generally low mortgage rates will keep the market moving ahead," said Helmut Pastrick, chief economist at Central 1.

Pastrick says supply constraints and rising land prices are the main factor pushing Toronto house prices higher and those issues are not going to disappear. The main danger facing the housing market are external factors, such as continuing turmoil in Europe, causing a global recession that could send the housing market into a major downturn.

Looking at long-term population projections and household sizes in the Toronto area, Pastrick estimates that by 2036, prices could rise by 60 to 95 per cent from their current record levels. While there will be cyclical swings in house prices, the long-term trend will be up as housing demand expands in the midst of land supply constraints.

Central 1 released two reports today, an analysis of the valuation of the impact of supply constraints on Toronto housing and a market outlook for 2012-14.


  • Recent price growth in Toronto has been robust as market conditions tightened due to strong demand and the current low level of active listings.
  • At more than $500,000 in April, the seasonally-adjusted average MLS® price gained about 5% from the final quarter of 2011 and on a year-over-year basis was 8.5% ahead of the same month in 2011.
  • While the pace of sales and price growth observed so far this year will slow, housing sales to remain elevated and housing prices to set new record highs.
  • Moderate market adjustment in apartment condominium starts expected during 2013.
  • Toronto's rising long-term housing price trend due to demand growth amid land supply constraints.
  • Supply issues too often overlooked in valuation of housing prices.
  • Easy credit and significant speculative activity in addition to high prices are needed for a bubble to exist.

"People adjust to high and rising house prices in many ways," Pastrick said. "Some may choose smaller or older houses, or longer commutes. Others may delay purchases and accumulate a bigger down payment. There is no question that in the longer term, a greater percentage of Toronto residents will be renters."

Toronto Housing Outlook 2012-2014


Toronto Housing Prices and Valuation


Central 1

Central 1 is the central financial facility and trade association for the B.C. and Ontario credit union systems. Central 1 represents a consumer-oriented, full-service retail financial system that serves 2.9 million members and holds $82 billion in assets and is owned primarily by its member credit unions, 45 in B.C. and 106 in Ontario.

With offices in Vancouver, Mississauga, and Toronto, Central 1 provides a wide range of services such as liquidity management, direct banking, and payment service solutions. For more information, visit www.central1.com.

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