Cautious optimism is on the lips of many Real Estate agents and economists. Though the last 12-18 months has definitely held some uncertainty in the housing market the future is looking much brighter for the Ontario home market.
Canada and Ontario appears to have avoided any lasting impact from the collapse of the US housing market and the subprime mortgage market meltdown. What we have seen over the past 18 months was fear versus demand and fair market values relative to the true economic environment in Ontario. From the price stability I have seen, I would say we are on great footing.
Here is my rational for Ontario home price appreciation for 2010.
Ontario home prices are fairly valued. Despite a healthy appreciation in home prices in Ontario between 2001-2009 we have avoided the huge run ups (and drops) in prices seen in Alberta and British Columbia.
Ontario’s housing supply appears to be inline or undersupplied versus the demand.
The 40 billion dollar economic stimulus package Canada has added to its current 507 billion dollar national debt represents approximately 8.5% in new debt. While this is bad news for most tax payers, borrowing to this degree will definitely cause price inflation. This will directly and positively affect the value of real estate.
The world economy appears to be stable or growing. Despite a US collapse, China’s GDP growth rate for 2009 is estimated to be around 8.2% and is forecasted to be in the 8%-9% range for 2010. India grew at a rate of 7.9% over 2009 and expects a 7% growth rate in 2010. Since Canada benefits directly from rising demand of natural resources, if the demand continues, this will be sure to have a further positive impact on the Canadian economy.
The unemployment rate in Ontario rose sharply as a result of the US economic collapse however has since started to slowly decline. The unemployment rate currently sits around 8.5%, it averaged around 6.2% during the 36 months of 2006-2008.
Slowly improving consumer confidence and record low interest rates are bound to have a positive impact on the spring 2010 housing market. The spring housing market may even be exaggerated by the fact that the Bank of Canada has signaled their intention to raise interest rates in June and the introduction of the HST on new home purchases in July.
Where prices go beyond the summer of 2010 will really depend on how much and how quickly the bank of Canada intends on raising rates.
