CMHC 2008 Housing market Outlook and Rental Market Report
New Home Market
Total new home sales will be slightly lower than in 2007, partly due to fewer existing home buyers moving into the new home market. Of the 38,000 total new home sales predicted for 2008, half that number or 19,000 will be pre-construction high-rise apartment sales. The remaining 50 per cent of pre-construction sales will be made up of low rise sales (i.e., single-detached, semi-detached and row/town houses, including stacked townhouses). Single-detached homes will only account for 30% of the homes sold in the GTA in 2008, the lowest number ever.
Starts Higher in 2008
Total home starts next year will amount to 35,000, with 13,500 being condominium apartments and another 1,000 being rental apartments. Overall multiple-family starts will account for two-thirds of new construction.
Condominium Apartment Investment
As condominium apartment completions rebound in 2008, the share held by investors will be of interest. If many investors list their units for sale shortly after completion, there could be downward pressure on pricing. Based on CMHC’s Fall Rental Market Survey, investors owned between 20 and 21 per cent of registered condominium apartment stock and could hold a greater share in unregistered projects. As projects complete, some of these investors will choose to sell their apartments in order to take advantage of increases in market value which occurred during the construction period. These increased sales are not forecast to result in declining values for condominium apartments. Currently, the resale market is very tight, with sales accounting for half of active listings. Moreover, the number of completed and unoccupied units is very low, ranging between 1,500 and 2,000 units. These tighter market conditions have resulted in average condominium apartment prices growing at an annual rate of close to 10 per cent in 2007. As more supply comes onto the market in 2008, however, the rate of price growth will moderate to approximately five percent or 2.5 times the rate of inflation.
Near Record Sales in 2008
Following a record breaking year in the Greater Toronto Area (GTA) in 2007, sales of existing homes will edge slightly lower in 2008, but remain at a near record above 95,000. Sustained growth in jobs and labour income, a diversity of mortgage products which keep borrowing costs low and ample choice will keep the demand for resale homes strong in 2008.
Market Conditions In Greater Toronto area
The City of Toronto will continue to be the tightest market across all housing types. Average price growth in the City will be close to three times the rate of inflation.The Regions of Halton (Oakville, Milton and Burlington), Peel (Mississauga, Brampton, Caledon) will continue to experience seller’s market conditions, but not as tight as in the City of Toronto. Expect average price growth to be in the range of two to 2.5 times inflation.
Cost of Home Ownership Key to Strong Demand
The cost of home ownership will remain manageable for the average household in the GTA in 2008. Home prices will continue to grow at more than twice the rate of inflation, but low borrowing costs will moderate these increases to a great degree. The required household income to carry a mortgage on a home priced at the forecast average of $388,000 will be $87,217. Many home buyers will be increasingly looking toward less expensive multiple-family homes, including semidetached and row (town) houses and condominium apartments.
Employment continues to rise and is forecast to grow 1.8 per cent in 2007 and more moderately at 1.5 per cent in 2008. Job growth in service-oriented industries will more than offset the job losses from the goods-producing sector. The unemployment rate in Toronto is forecast at 6.4 per cent for 2007 and 2008 – below the average unemployment rate experienced over the past two decades.
Population Growing through Migration in Ontario
The net inter provincial outflow has been more than offset by international migrants settling in the Toronto CMA, net migration did dip in 2007. In 2008, westward movement is expected to be more moderate and immigration is expected to increase. The result will be a 62,000 net increase in population due to migration in 2008.
More Households With Children in Suburbs
Census results show an increase in households with couples and children in some suburban municipalities of the Toronto CMA. The proportion of households with couples and children was above 40 per cent in Vaughan, Markham, Richmond Hill, Brampton, Oakville and Mississauga, compared to 25.5 per cent in the City of Toronto.
Mortgage Interest Rates
While still low by historical norms, mortgage rates are expected to rise gradually by 25-50 basis points in 2008.
Rental Market Outlook for 2008
Demand for rental housing in 2008 will remain on par with what was experienced in 2007. While both existing and new home sales are forecast to edge slightly lower next year, first-time buyers will continue to vacate rental accommodation in favour of home ownership. This movement, however, will be based on a strong increase in condominium apartment completions in 2008, more than double condominium completions from 2007 .
Condominium Apartment Rental Market
While the condominium apartment vacancy rate did increase in 2007, the level is still well-below (0.7%) that observed in the primary rental market.