November 15, 2011 – We’ve often discussed the importance of doing your research and due diligence when buying a home. One of the best resources – if you’re a first-time or move-up buyer or even an investor – is Canada Mortgage and Housing Corp. (CMHC).
And of all the valuable information and data CMHC produces, none is more educational than its annual housing outlook conferences, currently rolling out across the country, with its first stop in Toronto in early November.
It’s impossible for all homebuyers and homeowners to attend these events, for obvious reasons, and since they are open mostly to those in the industry. But if ever there was an excellent refresher on the fundamentals that determine and support real estate market conditions, and puts it all in perspective, this is it.
Here’s a summary of some key points:
» The economy: CMHC deputy chief economist Mathieu Laberge says the prospects for Canada’s economic fundamentals remain positive, despite the recent – and at the moment ongoing – global economic uncertainty. As an export-based economy, Canada is not immune from these international developments, though the domestic economy remains strong and therefore offsets any pessimistic outlook for net exports.
» Mortgage rates: Laberge says he expects mortgage interest rates to remain at the current historically low levels. For example, a five-year mortgage rate is expected to range between 5.2 and 5.7 per cent in 2012 – still at a 60-year low. In addition, any increase will be gradual.
Household debt: Household debt, cited as a concern by the Bank of Canada, federal finance ministry and others in 2011, reached a peak this year, and household credit growth is now decelerating. This means, importantly, that consumers are taking action to control their debt levels, which is good news.
» Housing starts: Housing starts, an important indicator of growth and health of the housing sector, will range from 170,900 to 199,900 units for 2011. In 2012, housing starts will be range from 161,650 to 206,350 units, which is right in line with demographic requirements.
» Employment and immigration: As the leading indicator of housing demand, employment levels will continue to support the housing market. Similarly, immigration – as better prospects for employment here attract “new Canadians” – first supports the rental market and eventually homeownership, slowed slightly this year but is expected to pick up again in 2012.
» GTA market: So, what does all this mean for the GTA? It may not sound like great news at first, but against the backdrop of global uncertainty, it is: the Toronto housing market will hold steady next year, with sales and prices remaining near current levels. “The market may feel somewhat slower than previous periods of high activity as buyers practice more restraint in light of slowing economic fundamentals,” says Shaun Hildebrand, CMHC’s senior market analyst for the GTA.
» GTA opportunities: Looking at three-year price appreciation, you can’t really go wrong buying in the GTA – and you don’t have to buy in the downtown core: Richmond Hill, Vaughan and Markham are examples of high performing areas; Scarborough, Whitby, Brampton and Mississauga are examples of areas that perform (a little less) well but are more affordable.
So, while the outlook at a glance may not appear spectacular, given the challenges of the past year, and how things are elsewhere, 2012 looks promising for both buyers and sellers: no major volatility, low interest rates and a stable economy.
Wayne Karl is an award-winning writer and editor with experience in real estate and business. In Fundamentally Speaking, Wayne explores the basics – such as economic fundamentals – you need to examine when buying property. Email him at wayne.karl@wall2wallmedia.com or follow him at Twitter.com/WayneKarl