Housing in Mississauga and GTA Could Climb Another 25% This Year
No, prices aren't cooling off.
At least as far as TD Economics is concerned.
According to the recent report, there's no relief in sight for prospective GTA buyers who were hoping to see the red-hot housing market cool off in 2017.
"One of most asked question to economists living in Toronto these days is: what's going on with house prices? The answer: it's complicated. Home prices in the Greater Toronto Area (GTA) have risen by an average of 19% over the past twelve months, marking the fastest pace since the late 1980s," the report reads. "Whether you subscribe to the view that the heady price gains reflect supply constraints or demand factors (it's both!), the evidence is stacking up that the GTA market has been divorcing from economic fundamentals since early 2016."
TD Economics has upgraded its home price growth forecast to range between 20 and 25 per cent in 2017. The increases should continue, as the financial institution is predicting sustained growth of three to five per cent in 2018.
As for whether a correction is coming, it's hard to make predictions.
"Historically, it's difficult to find a period across U.S. and Canadian markets where sustained home price growth of this magnitude was not followed by a period of contraction. The longer the cycle runs, the greater the risk of a contraction," the report reads. "There are a number of policy tools tested in the global arena with some effectiveness in containing froth in demand, such as a foreign buyers tax and various macroprudential rules."
In terms of a foreign buyer's tax, the government has toyed with the notion of implementing one in Ontario. While some people have supported the notion, other experts have argued it won't help, saying the price increases are more a supply and demand issue (no inventory) than an over-investment one.
And as for whether or not we're living in a precariously thin bubble, TD says bubble talk is a "distraction."
"We caution in drawing comfort from conditions of tight supply or robust demand, as neither preclude the market ending badly or the building of systemic economic risk. Having a debate on whether there's a housing bubble is a distraction, since this tends to be confirmed only retrospectively. What we can say is that when comparing this housing cycle to previous ones that lack a happy ending, Toronto appears to be moving in that direction."
While that sounds disheartening, TD believe some forces—such as higher mortgage rates—could work to cool the market, but that's not guaranteed.
"We look for the effects of higher mortgage rates and eroding affordability to "cool" the GTA market in 2018, but here too we would not be surprised to see an overshoot."
So whether prices will eventually drop is anyone's guess.
Right now, house prices in Brampton and beyond are hotter than ever and could remain sky high for the foreseeable future.