GTA New Home Guide - Jun 23, 2018

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Canada Mortgage and Housing Corp. released its Housing Market Insight report on the Ontario market in June. CMHC examined past housing market busts in Ontario and the GTA and looked at factors that predict such corrections in average values. It concluded that there had been about five corrections between the late 1960s and 2016. One of the major factors that predict housing market busts is government intervention. The Ontario government’s Fair Housing Plan in April 2017 certainly put the brakes on the housing market last year, which in retrospect was a very good thing, because that train was travelling recklessly down the track and heading for disaster. Unfortunately, some good people got caught up in the frenzy. The drop in GTA real estate values has made everyone a little more cautious about buying a home in 2018, especially a more expensive new home. However, CMHC believes the worst is over. The report mentions that economic growth in Ontario will slow in 2018 and 2019, but employment and income will continue to rise, which supports house prices. In addition, CMHC indicates that new household formation has outpaced the increase in the housing stock – adding further support to the level 30

of home prices, as new supply is not keeping pace with new demand. Not everyone agrees with those sentiments, with many people calling for further price declines in the GTA due to higher interest rates, less credit availability with the new mortgage rules, the high level of pre-construction investors, the decline in offshore money coming to Toronto, and future oversupply. Interestingly, CMHC points out in its latest report that several factors had negligible impacts when predicting major busts including: Rising speculation, a growing housing stock and declining foreign capital flows. The disagreement between folks who follow housing data closely reminds me of a quote by Charles Wheelan from a book called Naked Statistics. He provides his answer to the dilemma of data analysis: “Even in the best of circumstances, statistical analysis rarely unveils ‘the truth.’ We are usually building a circumstantial case based on imperfect data. As a result, there are numerous reasons that intellectually honest individuals

may disagree about statistical results or their implications.” I’m not sure you’re going to find any concrete truths in the next Toronto Real Estate Board data release, but I agree with CMHC’s outlook. A surging population, a stable economy and a housing market that is witnessing rising average resale prices on a monthly basis, the worst of the price correction is behind us, and look for average values to rise modestly this year. Good Luck.

Ben Myers is president of Bullpen Research & Consulting, a boutique real estate advisory firm that works with land owners, developers and lenders to better inform them of the current and future macroeconomic and site-specific housing market conditions that can impact their active or proposed development projects. Follow Bullpen on Twitter at @BullpenConsult or visit