Central 1 Credit Union

Central 1 Credit Union

May 31, 2011 05:01 ET

Ontario Home Sales Dip in 2011 but Expected to Rebound Slightly Over the Next Two Years, According to Central 1 Credit Union

TORONTO, ONTARIO--(Marketwire - May 31, 2011) - Ontario's housing market will see slightly fewer sales in 2011 before economic growth gets sales moving again, according to the Ontario Housing Forecast 2011-2013, released today by Central 1 Credit Union.

Moderate economic gains in the province driven by an improving labour market and income prospects, along with the continuation of low interest rates, will keep Ontario's housing market steady through 2013 with a general upward trend in price levels.

Following a strong second-half rebound in existing home sales in 2010, provincial sales activity peaked in January at a seasonally-adjusted annualized rate of 211,000 units. This peak has given way to an 8 per cent decline in the provincial sales trend through to the end of April, with activity declining in most regions in Ontario since the December to January period.

Annual MLS® sales are forecast to reach 191,000 units this year, reflecting a decline of 2.3 per cent from 2010. In 2012 and 2013, sales are forecast to edge up to 198,000 and 200,000 units.

"The more stringent mortgage insurance rules that came into effect in the spring were equivalent to a tightening of credit conditions," says Helmut Pastrick, Central 1's Chief Economist. "Some buyers were priced out at the margins and, as a result, we saw a downshift in the market demand."

Higher borrowing costs are also expected to cut into demand over the forecast horizon. Mortgage rates are currently near historically low levels, but have only one direction to go.

"We expect to see a moderate affordability squeeze, particularly for first-time or low-equity buyers. However, rates will remain relatively low and conducive to homeownership, rising by about 100 basis points through 2012," commented Pastrick.

Although overall sales have been on the decline, the average prices of homes in the province remains strong. Following a modest 5 per cent decline in the seasonally-adjusted provincial average price in the first quarter of last year, the average price of homes sold through the MLS® system rose 9 per cent through to April 2011 to push above $365,000.

"We have seen gains in the average price of nearly 20 per cent relative to the levels that preceded the recession in 2008," said Pastrick.

But with annual sales edging lower in 2011 and rising only moderately through 2013, price gains will be smaller over the following two years. The average price of homes sold through the MLS® system in Ontario is forecast to reach $358,900 this year, up 4.9 percent from 2010.

However, most of this appreciation will reflect early year gains. In 2012, average price gains are expected to be modest, rising 3.9 per cent to $373,000 with a 3.2 per cent gain to follow in 2013.

Among regional markets, annual 2011 price gains in Ontario are forecast to be strongest in the economic regions of Toronto, Hamilton-Niagara Peninsula, and Ottawa, reflecting employment levels less affected by the recession.

Markets forecast to see a decline in the average residential price include Windsor-Sarnia, Stratford-Bruce Peninsula and the Northwest. Labour markets in these regions were generally weaker in the latter part of 2010, leading to declining demand in 2011.

The full report, Ontario Housing Forecast 2011-2013, is available here: http://www.central1.com/publications/economics/pdf/ea/ea%202011_ont02.pdf

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 $70 billion in assets and is owned primarily by its member credit unions, 45 in B.C. and 119 in Ontario.

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

Contact Information