Earlier in the week, we brought you our 2012 Toronto real estate roundup: an accounting of the year in real estate, including all the bumps and shifts that have characterized the past year’s real estate market in Toronto and the GTA. Now that the year has turned, we’re looking forward into 2013 and considering what the market might look like in the year ahead.
Which Factors Will Make A Difference?
2012 was a turbulent year in Toronto real estate, and we’re entering 2013 on an uncertain note for several reasons.??For one, we’re looking to see the longer-term effects of the CMHC mortgage rule changes, along with the question of Canadian interest rate changes, both of which will likely be felt fully in 2013.
We’re also not sure whether Mayor Rob Ford – a champion of the mission to repeal Toronto’s onerous double land transfer tax – will still be in office come spring. He’s been given an appeal of the decision that ousted him, but it remains to be seen who’ll be leading Toronto for most of 2013, and what their stance is on the land transfer tax, which CD Howe estimates is causing a sag in the Toronto real estate market of 16%.
What Will 2013 Bring?
We’re always hesitant to make predictions about what will happen in the next 12 months, simply because there are so many external factors that can affect the Toronto real estate market: global economic stability/instability, interest rate shifts, policy changes (like a potential repeal of the Toronto land transfer tax), and so forth. The following predictions are made with the information we have at the present moment: and as we all know well, everything can change fairly quickly in real estate. (Which is, of course, why you need a skilled real estate agent to help you weather whatever changes may come.)
That said, first of all, we believe??the Toronto real estate market, and the Canadian housing market in general, won’t crash.??Larry MacDonald of the Globe and Mail agrees with us??- his argument is essentially that the monetary environment in Canada is supportive of the housing market, and is absent the tightening that the US experienced in its housing crash of 2007. Although the??CMHC tightened mortgage rules in July 2012, which turned our hot market into a more balanced one, Canadian banks are still quite willing to lend to qualified buyers, and interest rates remain super-low for the time being. As well, because the Canadian economy is doing well, with relatively robust job creation and rising incomes, there will likely continue to be buyers for homes at current, and rising, prices.
There are a few more trends that we see continuing into 2013, and factors that will affect the market… and we’ll keep you updated, as always, on how things turn out.
- No Worse Than Now: On a national scale, the Canadian Real Estate Association (CREA) forecasts that the market will be fairly balanced in 2013: “Most provincial housing markets are currently balanced, and are expected to remain or return to balanced market territory for 2013.” CREA also suggests that most of the chill put on the market by July’s CMHC rule changes has already been felt: “The continuation of moderate economic, job, and income growth will temper the impact of recent mortgage rule changes, which are not expected to dampen activity much more than has already been felt until interest rates are expected to begin rising in late 2013.”
- Let’s Talk Interest Rates: The Bank of Canada has been warning for several quarters about interest rate hikes, while at the same time keeping them anchored at 1% each time. But before you start thinking that Mark Carney has been crying wolf, consider that at some point, interest rates must??rise. Carney (who is leaving Canada to become the Governor of the Bank of England) points to the positive effect of these warnings, which have led to a doubling, to 90%, in the percentage of new mortgages that are fixed-rate. Larry MacDonald predicts that we’ll see an interest rate hike near the end of 2013: in the meantime, there’s nowhere for rates to go than up, so it’s a great time to get the lowest mortgage rates in history.
- Slow but Steady Housing Starts:??Condos have gotten a bad rap in Toronto in the past several months; although detached homes have been rising in price fairly steadily, condo prices – and development – have been much more turbulent. We’ve also seen housing starts – the number of new homes on which construction begins in a given month – dip, and then increase, and then??dip again in November. We believe that the condo market will likely continue to be more turbulent than the market for detached homes, but that it will likely balance rather than crash; despite temporary setbacks, developers that listen carefully and build to demand are likely to be fine.
What do you think? Do you agree or disagree with our 2013 forecast? Why? Tell us in the comments!