Toronto, O.N., August 26, 2020 –
- Home ownership market on fire this summer but set to cool off
- Home sales to decrease by 2.9 per cent in 2020 before rebounding by 5 per cent in 2021
- Housing starts – currently tracking 14.7 per cent above last year’s pace – set to decline by 1 per cent in 2020, before an 8 per cent increase in 2021
- Tight market conditions to favour price growth in 2020: average home price to increase by 9.8 per cent this year and 7 per cent in 2021
- Purchase of vacation homes on the rise during current flurry of activity
Ontario’s housing market “has been on a tear since its economy re-opened in May” but the current astonishing sales growth will slow over the remainder of the year as sales decline by 2.9 per cent in 2020 before rebounding by 5 per cent in 2021, according to Central 1 Regional Economist Edgard Navarrete in his latest Ontario Housing Forecast 2020-2021.
Navarrete notes that buyers who were held back in the Spring have joined the post-lockdown Summer rush, creating a scenario whereby July sales reached 112.5 per cent of February’s total, following May and June increases of 56.6 per cent and 67 per cent respectively. Toronto – which typically accounts for nearly half of all sales in the province – saw a 29.5 per cent increase over July 2019 and a new sales record for the month of July.
“The current pace of growth is robust during normal times but even more astonishing in the middle of an ongoing pandemic,” said Navarrete, who finds that current year-to-date sales are still outpacing last year’s tally in the following markets:
- Barrie (up 15.5 per cent)
- Durham (up 8.7 per cent)
- Grey-Bruce (up 6.8 per cent)
- Muskoka/Haliburton (up 11.3 per cent)
- Parry Sound (up 28.9 per cent)
- Tillsonburg (up 8.5 per cent)
“With very attractive mortgage rates, many current homeowners with money to spare are likely taking advantage to enter the vacation home market,” he observed.
The average Ontario home price is expected to increase by 9.8 per cent in 2020 (to $666,443) and by 7 per cent in 2021 (to $713,093), Navarrete states.
Affordability concerns and an uncertain economy will pull down sales in Toronto and Ottawa once the summer rush is over, Navarrete believes. Regions which are heavily reliant on the export and goods sectors, such as Windsor-Sarnia, Hamilton-Niagara-Peninsula, the Northwest, and Northeast will also see housing market activity slide due to weaker trade activity.
“Trade tensions with the U.S. and an already weakened foreign consumer demand will affect production and sales of manufactured goods and commodities, adversely affecting economic growth in those regions,” Navarrete said, adding: “Regions with significant tourism exposure such as Hamilton-Niagara-Peninsula, Ottawa, and Toronto will see fewer tourist visits and thick borders will keep any willing travelers from even attempting to visit or immigrate.”
New listings in the province will decline by 12 per cent in the remainder of 2020 as fewer sellers decide to list their homes as a result of COVID-19 induced economic uncertainty. “By 2021, new listings will begin to climb again, increasing 7 per cent,” said Navarrete, who believes “this jump will come from some stress selling by homeowners who are unable to remain financially afloat.”
According to the economist, significantly fewer new listings will offset the drop in sales, thereby maintaining firm prices.
“Average home prices through the MLS® system are expected to move up 9.8 per cent in 2020. By 2021, even with increased listings and a shift in sales composition acting as price decelerators, the strong price hand-off from 2020 baked into the numbers means average price growth for 2021 could rise seven per cent,” he said.
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Meadhbh Monahan (pronounced ‘Maeve’)