Ontario home prices are set to rise about 5% a year and sales will be strong through 2017, according to a new forecast by Central 1 Credit Union, based in Vancouver.
The housing market is poised to expand at a robust pace, driven by a stronger economy thanks to faster growth in the U.S., the weaker loonie, and energy savings from lower oil prices, says Helmut Pastrick, chief economist at Central 1.
Upward pressure on house prices will continue though it will ease later in this three-year forecast when listings will come onto the market at a faster pace.
“In recent years, supply has not kept up with sales, resulting in price increases well above the inflation rate,” says Pastrick. “Housing sales are forecast to rise about 3% each year through to 2017 with housing prices rising close to 5% annually.”
This means that affordability for buyers will worsen, as the price-to-income ratio, which is at an all-time high in Ontario, will only increase, according to Credit 1’s forecast.
The increase will be even more dramatic in Toronto, where record-high prices are forecast to increase by 17 per cent in the next three years.
“Some commentators believe that Toronto housing is in a bubble and about to crash, but I disagree,” Pastrick said. “The principal drivers of home prices are market demand and supply fundamentals. Toronto’s population is growing and supply is limited. Prices will keep rising until the next economic recession, whenever that is.”
Markets outside Toronto are expected to gain momentum with more regional markets participating in this housing expansion phase. Southwestern markets can expect to build on recent gains thanks to a strengthening local economy, which will be helped by an improved manufacturing base benefitting from the lower currency and improving U.S. economy. Sales in Northern Ontario will see slower sales growth because of poor mining prospects, according to the report.