TORONTO, ONTARIO--(Marketwired - Dec. 12, 2013) - Ontario home prices will rise about four per cent a year through 2016, down from an annual average of about six per cent over the past decade, says a new forecast by Central 1 Credit Union (Central 1).
Higher mortgage rates in the next three years will restrain housing sales but not cause a market correction, said Helmut Pastrick, Chief Economist for Central 1, the trade association for 140 credit unions in Ontario and British Columbia. An improving economy will underpin the housing market, he added.
The average price of Multiple Listing Service® residential sales is forecast to rise at four to five per cent annually through 2016 in the Toronto, Northeast and Stratford-Bruce regions. Average price increases of two to three per cent annually are forecast in the Northwest, London, Windsor-Sarnia, Hamilton-Niagara and Muskoka-Kawarthas regions. Average price growth of around one per cent annually is forecast for the Kitchener-Waterloo, Ottawa and Kingston-Pembroke regions.
Sales growth through 2016 will be concentrated in Toronto, although sales are also forecast to rise in the Northeast, Windsor-Sarnia and Stratford-Bruce regions.
Sales will remain near 2013 levels in the Ottawa, London and the Northwest regions. Sales are forecast to slow in the Kingston-Pembroke, Hamilton-Niagara, Muskoka-Kawarthas and Kitchener-Waterloo regions.
Ontario's overall rental apartment vacancy will hold steady at 2.6 per cent through 2014, before declining to less than two per cent in 2016.
The Toronto condo market is expected to slow and builders to delay new construction in the face of weaker demand. The total number of new condos in Toronto in pre-construction, under construction, occupancy and sell-out phases will be about 100,000 units at the end of 2013. An inventory correction is underway so new apartments in all phases will rise only 2.2 per cent in 2014 compared to average double-digit annual growth since 2010. Apartment construction starts will resume growth in 2015 and 2016.
Pastrick said fears of a housing bubble and a price collapse are misplaced. He predicts rising population and land supply restrictions will result in Toronto house prices doubling over the next 25 years.
"Housing in Toronto is expensive but not overvalued, especially from a long-term perspective," Pastrick said. "Today's record high prices will seem inexpensive in 25 years. Housing affordability will worsen with the price-to-income ratio rising in coming years."
The full report Ontario Housing Outlook 2014-2016 is available on central1.com.
About 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 3.2 million members and holds $91 billion in assets and is owned primarily by its member credit unions, 44 in B.C. and 96 in Ontario.
With offices in Vancouver, Mississauga and Toronto, Central 1 provides liquidity management, direct banking and payment service solutions as well as a wide range of trade services. For more information, visit www.central1.com.