TORONTO, ONTARIO--(Marketwired - May 21, 2014) - For the next two years Ontario's housing market will see steady sales and new home construction with prices increasing, but more slowly than in the past decade, says Central 1 Credit Union.
This year home prices will increase by about five per cent and then from 2015 to 2017 they will gain about three per cent per year, down from the average six per cent of the last decade, said Helmut Pastrick, Chief Economist for Central 1, which is the trade association for most Ontario credit unions.
"In past economic cycles, the housing sector has led economic growth, but the prolonged period of ultra-low interest rates since the recession means that housing market performance will be a laggard and depend on broader economic and employment growth," Pastrick said.
Ontario's housing market has been mixed in the early stages of 2014 with a significant slide in sales via the MLS® system but continued price gains. Following a third-quarter peak, sales decelerated to an annualized pace below 180,000 units in the first quarter, marking a multi-year low.
Key findings in the forecast:
- Sellers have responded to the temporary drop in sales by pulling or delaying listings.
- Home prices continue to rise with the average home costing $420,000 in the first quarter, up nearly eight per cent from year-ago levels.
- Prices will rise five per cent this year and about three per cent per year through 2017 to reach $463,000.
- Home sales will average about 200,000 per year.
- Housing starts fell 20 per cent in 2013 to 61,085 units. They will decline again this year, before starting to increase.
- The average vacancy rate for rental properties was 2.6 per cent in 2013.
- The vacancy rate will hold at current levels this year before declining to less than two per cent in 2016.
"Interest rates will rise in coming years, outpacing income gains, which will dampen the housing market, but not cause a correction," Pastrick said. "Higher interest rates will reflect improving economic conditions that will drive higher consumer confidence, incomes and employment, which will boost home sales."
Read the Ontario Housing Outlook 2014-2017.
About Central 1
Central 1 is the central financial facility and trade association for the B.C. and Ontario credit union systems. Owned primarily by its member credit unions, 43 in B.C. and 90 in Ontario, Central 1 represents a consumer-oriented, full-service retail financial system that serves 3.2 million members and collectively holds $92.0 billion in assets.
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.