With much of 2018 in the rear-view mirror, It’s been quite the year for the housing market in the GTA and elsewhere in Ontario. From sales and price fluctuations to supply concerns to rising housing costs. As 2019 approaches, here are five things we can learn from real estate in 2018.
1 Get used to the affordability issue
Get used to affordability challenges, especially in the GTA. This oft-cited issue is not going away any time soon, despite lobbying from the likes of the Building Industry and Land Development Association (BILD) and the Toronto Real Estate Board (TREB).
Key economic fundamentals such as population and employment growth will continue to drive housing market demand. Over the next decade, almost 700,000 first-time buyers will target the GTA or Hamilton markets, according to a report from the Ontario Real Estate Association. Meanwhile, the supply of new homes is not yet being addressed, which contributes to rising prices.
With recent interest rate hikes and other changes, sales and prices in the GTA saw some moderation in 2018. But this will be short-lived, and a return to price growth is expected.
2 Increased government involvement – finally
Government lobbying by BILD and TREB seems to be paying off, in the sense that the Province is increasingly aware of the issues facing the industry – and buyers.
Buyers, you may not realize it, but you should thank BILD, TREB and other associations for that.
In late November, Ontario announced it was committing to a housing action plan “to help create more housing faster, give people more choice and bring down housing costs.”
Like anything involving government, though, this process will likely be slow moving – meaning, some of the challenges, namely increasing housing supply – will take time to be resolved.
But at least the issues are on the agenda.
One real example of this improved awareness is Ontario’s recent plan to change the 40-year-old apprenticeship system in the province – a move the home building industry says is a “game changer.”
It’s a game changer because the new one-to-one ratio, a significant change from the existing 3-to-1 ratio, will enable home builders and renovators to more easily hire and train new apprentices. Besides creating more job opportunities for trades workers, the move also helps builders and renovators operate their businesses
3 Fixing on interest rates
The Bank of Canada raised its overnight rate three times in 2018 – January, July and October – to where it sits now, 1.75 per cent.
Canada’s major banks, as is usually the case, responded by immediately raising their own rates.
Naturally, all of this has Canadians feeling a little uneasy.
The Conference Board of Canada’s latest Index of Consumer Confidence confirms that rising interest rates and weaker wage growth have started to take their toll on confidence. With interest charges squeezing Canadian wallets and weakening wage growth offering little reprieve, consumers have become hesitant to make major purchases and are less positive about the state of their finances.
In its latest rate announcement on Dec. 5, the Bank of Canada noted that global economic expansion is slowing, and the effects of the “oil price shock” are being monitored.
“We expect that the Bank will not move the overnight rate until the effects of the declining energy sector are known,”according to interest rate comparison website ratehub.ca. “However, the Bank makes it clear that they still plan on raising the key interest rate in 2019, likely more than once.”
This moderated stance might put downward pressure on fixed rate mortgages, however, so Canadians may see better fixed rates in the coming weeks, ratehub.ca says.
4 Real estate is more local than ever
It’s a simple point that escapes some consumers: Real estate is local, and in 2018, it became more local than ever.
What do we mean?
Well, the Canadian Real Estate Association (CREA), Canada Mortgage and Housing Corp. (CMHC) and other major real estate bodies are mandated to oversee the national market.
So, when CREA issues a release that says Canadian home sales are down by X per cent, or when CMHC reports the national vacancy rate is down for the second consecutive year – and major media report such headlines – people tend to worry.
It’s essential to remember, however, that when you buy a home, you don’t buy the national market. You buy one house, on one street, in one neighbourhood, in one city and region.
If you live in Ontario, why do you care that Alberta’s ongoing oil industry struggles are pulling sales and prices down in markets in that province? Or that prices in Vancouver are even less affordable than in Toronto?
Forget the national headlines. Drill down into what’s happening in your market.
And why is real estate more local then ever? Because…
5 Lessons from Oshawa
General Motors Canada’s November announcement that it was closing its Oshawa assembly plant sent shockwaves not just through the province but all of Canada. To be sure, the loss of at least 2,500 jobs – not to mention untold positions in related suppliers – in a community of 170,000, is going to hurt. Hurt whom, and how badly, are the only questions.
This development should serve as a stark reminder to us all – of how important it is for cities to develop diversified, modern economies. Overdependence on any one ge, singular industries leads to overexposure in the case of downturns or, in GM’s case, outright shutdowns. It hurts the local economy, which impacts employment and wage growth, which impacts the housing market.
Oshawa, thankfully in recent years, has been diversifying its economy and expanding in technology, education and other industries. It will help, but the impact of the GM closure will likely play out over many months, if not years.
These developments could push housing in Oshawa into a buyers’ market, and prospective buyers could benefit from more options and softening prices.
In new homes, builders remain undeterred, encouraged by the longer-term growth and development throughout the Durham Region. Still, some may offer incentives such as discounts or inclusions to entice qualified buyers.