Toronto house prices are expected to rise year-over-year, as low interest rates and a shortage of homes for sale continues to leave doomsayers disappointed.

Susan Pigg – Toronto Star

Toronto house prices are expected to rise by 2.5% in 2013, year-over-year, as low interest rates and a shortage of homes for sale continues to buoy prices and leave doomsayers disappointed, says realty company Royal LePage.

Overall, the Canadian housing market is expected to see a pickup in sales in the second half of 2013, but prices are likely to remain soft into mid-2014 when the country should start emerging from what’s nothing more than a “normal cyclical correction” that began a year ago, says a market survey forecast released Tuesday.

Comment: No, it is not a normal correction. It was a slowdown caused by new mortgage rules. Once July is over and we can finally compare two months with the same rules, we will see all of that negative growth disappear. Heck, we have sales up already in the first half, with 9 days of old rules left. The next 6 months are going to be a polar opposite to the first half of the year. Still negates the doomsayers, but what about those who called this some sort of correction, or something normal and natural?

Calgary is expected to lead the way, with 6.5% house price growth by the end of this year, followed by Regina (5.8%), and Winnipeg (3.9%).

Toronto follows with expected gains of 2.5%, and condos flat lining rather than falling, which should bring the average GTA house price to $511,500, up from just under $500,000 last year and $466,352 in 2011, predicts the survey.

Comment: Hard to believe that when we have price increases in the 5-8% range in the past months. And the average price can vary widely depending on the month.

“Those hoping their predictions of a bursting bubble and cataclysmic drops in home values will come true are out of luck again,” says Royal LePage president Phil Soper.

Comment: For the 10th straight month now!

Sales, however, are expected to come in 4.5% lower by the end of 2013 than they were in 2012.

Comment: Maybe. We were down 10-15% for the first half of the year, could be up by the same amount for the second half. I bet sales will end somewhere between 5% down and a 1-2% up. But there are no more crashing sales figures, we have months with the same mortgage rules to compare. And just wait until later this year, when we start comparing against months with really low sales numbers at the end of 2012.

As of the end of June, the average sale price of a detached bungalow in the GTA was up 3.1% to an average of $577,495 compared to the first half of last year, says Royal LePage in its quarterly house price survey.

The price of a standard two-storey home was also up, some 2.2%, to an average of $683,241.

Two other major indicators of housing market health — new housing starts and building permits — also defied analysts’ expectations, “not to mention Mother Nature and a bout of labour market unrest,” said BMO economist Robert Kavcic in a market assessment Tuesday morning.

Comment: Defied the analysts and “experts” but not those in the new and resale housing industry. We knew that the sales drop was because of the new mortgage rules and that the disparity would disappear this month. And those in the new side of things knew that mortgages had some impact, but that weather and supplies slowed things, as well as just cyclical slowing. We can’t build at 110% every single month!

Housing starts for June came in at much more robust levels than widely expected, especially in British Columbia, tracking at close to 200,000 units for this year, just slightly below projections that had just been revised upwards in May to 204,600 units. That has raised expectations that housing may remain a driver, rather than the much-feared drag, of economic growth across the country in 2013.

Despite a pullback in new condo launches this year, especially across the GTA, and the continued decline in new ground-related home construction, building permits also continue to climb, which is being seen as another indicator the housing market has, so far at least, defied skeptics who have predicted this is the year that the bubble will finally burst.

Comment: Many GTA builders took a quarter or two off, caught their breath, surveyed the landscape. There is a LOT of construction going on, don’t be mistaken. Not launching 10-20 projects does not mean everything is crashing to a halt.

“With (home) sales finding a floor in recent months, prices well behaved and homebuilding close to demographic demand, the soft landing story looks firmly in place,” said Kavcic.

Comment: What landing? When everything continues to rise, how is that a landing of any sort?

Even Toronto’s much-criticized condo sector – which the Bank of Canada recently cautioned is suffering from over pricing and over supply – held its own with average prices coming in at $366,189, about 0.7% higher than a year ago, shows the survey.

“In the short term we anticipate some market uncertainty and moderate price adjustments, particularly in Toronto, which is working through a supply spike, however, the medium and long-term prognosis remains very positive,” said Soper.

Comment: Over supply is still the stupidest term every. Condos are not built until they are sold, so every crane indicates demand for that building. Developers build only that what is paid for, supplying the demand and no more. A completed building is 90% sold, in general, so all of those units are not suddenly for sale. They were sold years before. And with sales and prices fairly flat, builders took time and stopped launching new projects for a bit. Exactly what one would expect in a prudent market.

“Demographic and city-planning trends, in conjunction with shifting consumer preferences, remain supportive of this housing category.”

But Capital economics countered, saying that slipping sales of new homes and condos, as well as a surging inventory of new condos for sale — significantly above historic norms — bodes badly for the future.

Comment: Actually, the inventory of unsold condos is statistically the same as historic norms, percentage-wise. Generally, sold condos range around 89-91%, with current levels at 91%. While yes, there are more overall, as there are more condos in general, but the percentage is well within historic ranges. But it is easier to spin it as a problem when you only take the absolute number, not the relative percentage, which tells a different (and not negative) story.

Its economists expect housing starts to resume their downward trajectory, and with them economic growth, later this year.

Comment: And these same economists have been wrong month after month after month after month now. Can we stop asking their opinion?

—————————————————————————————————–
Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.
—————————————————————————————————–