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TREB revises 2017 home buying forecast downwards

Thursday, July 20, 2017

Following the announcement of the Ontario Fair Housing Plan, the Toronto Real Estate Board (TREB) commissioned Ipsos Public Affairs to conduct two consumer surveys focusing on home buyers and home sellers. The surveys were conducted between May 23 and 29.

The survey of home sellers found that 30 per cent of GTA households are very likely (12 per cent) or somewhat likely (18 per cent) to list their home over the next year. It reported that 15 per cent of households said that the Fair Housing Plan was the primary reason why they would list their home over the next year. Of the respondents who are likely to list their home, 80 per cent said they would be purchasing another home.

Meanwhile, the home buyers’ survey found that 35 per cent of households indicated they were very likely (13 per cent) or likely (22 per cent) to purchase a home over the next year. Forty per cent of those respondents indicated they would be first-time buyers, a significant decline from the 53 per cent in Ipsos’ fall survey. Among those who reported they would not be purchasing a home, 10 per cent said the Fair Housing Plan was a key factor in this decision (one per cent) or a contributing factor (nine per cent).

“The recent Ipsos survey results suggest that home buying activity in the GTA will remain strong moving forward. The year-over-year dip in home sales we have experienced over the last two months seem to be the result of would-be buyers putting their decision to purchase temporarily on hold while they monitor the impact of the Fair Housing Plan. On the supply side of the market, it certainly looks as though buyers will benefit from more choice in the second half of 2017 compared to the same period in 2016,” said Jason Mercer, TREB’s director of market analysis and service channels.

TREB releases 2017 forecast results

The Ontario Fair Housing Plan has prompted some households to decide to wait to purchase a home, at least in the short-term. This includes would-be first-time buyers, who have more flexibility, allowing them to wait and see before making a decision. However, the recent Ipsos survey results on likely home buyers suggest that many households who have moved to the sidelines will return to the market over the next year, possibly after reassessing the type and/or location of the home they plan to purchase.

“The Ontario government recently released their first wave of foreign buyer statistics, which confirmed earlier TREB research that showed foreign buyers, even in the pre-Fair Housing Plan era, represented a very small proportion of overall home purchases – slightly less than five per cent,” said John DiMichele, TREB CEO. “This, taken along with the strong buyer intentions reported by Ipsos, suggests that we will see many households moving back into the home ownership market over the next 12 months.”

“It remains to be seen whether the level of inventory will hold up to accommodate the eventual resurgence in demand. The Fair Housing Plan was less precise as it related to long term housing supply issues,” continued DiMichele.

While the impact of the Fair Housing Plan on home sales may only be temporary, the TREB notes that the probability of higher borrowing costs over the next year has increased. TREB believes the Bank of Canada will raise its Target of the Overnight Rate at least once during the second half of this year. Prospective Bank of Canada increases have already been reflected in Government of Canada bond yields and posted mortgage rates, at least to some degree. Advertised discounted mortgage rates, however, remain at or near historic lows.

When considering the temporary impact of the Fair Housing Plan and the further impact of higher borrowing costs, the TREB has revised its forecast range for 2017 transactions down to between 89,000 and 100,000.

While home sales this year will be down, listing activity is expected to grow. As home owners react to strong equity gains over the past year, as well as feelings that price growth will moderate in the future, TREB expects new listings to increase year-over-year, predicting new residential listings in 2017 to range between 175,000 and 190,000.

TREB predicts we will see more balanced market conditions, with sales accounting for a lower percentage of listings in the second half of 2017 compared to the first half. The overall growth rate for the average selling price in 2017 will sit between 13 per cent and 18 per cent. Although this annual rate of growth is still very strong, it is still a moderation in year-over-year average price growth in the second half of 2017. This is expected to be caused by more balanced market conditions and a change in the mix of homes purchased, with a larger share of purchases in both the townhome and condominium apartment home types.

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