As 2010 concluded, we were greeted with a report from TD Economics stating that the Canadian housing market has “sidestepped both worst-case scenarios of a bubble and crash and the resale market appears to have landed safely and somewhat earlier than anticipated”. According to the Bank of Canada “the recovery in Canada is proceeding at a modest rate and inflation dynamics have been broadly in line with the Bank’s expectations”. The recovery is expected to be more gradual than initially projected with growth of 2.3% in 2011 and 2.6% in 2012; with the economy running at full capacity by the end of 2012.
In Canada, all 400,000 jobs lost during the recent recession have been regained, compared to only one-fifth of the lost jobs in the United States being regained. It is also expected that the “economic growth in Canada will be less reliant on household spending and government stimulus measures, while business investment and exports should pick up the slack”, according to Mark Carney, Governor, Bank of Canada.
There was much speculation that interest rates would rise after the second quarter of 2010, but fortunately these rate increases never materialized. In October of 2010, the Bank of Canada announced that it would maintain its policy interest at 1%. The Bank stated that at 1%, “the policy rate leaves in place considerable monetary stimulus, which is consistent with achieving 2% inflation target in an environment of significant supply in Canada”. It now appears that interest rates should hold steady well into 2011, this bodes well for anyone looking to purchase or re-finance their homes.
In 2011, compared to 2010, the markets will not have to assimilate a new tax, such as the Harmonized Sales Tax, or have the added stimulus of a Renovation Tax credit. There is much anticipation over the newly elected Toronto City Council’s campaign promise to eliminate the onerous Toronto Land Transfer Tax. The Toronto Land Transfer adds a substantial expense for the Toronto homebuyer and impacts the overall affordability of a home purchase in Toronto.
Heading into 2011, the Central Toronto market is still relatively active with the typical seasonal slowdown, though not as prevalent as observed in prior years. The listing inventory levels are still quite low and the buyers are still in abundance. The buyers tend to be very selective and the importance of pricing is paramount to both sides of the transaction. Over-priced listings are continuing to stagnate and properly priced listings are often going in competition. A window of opportunity now exists with the low inventory levels for anyone thinking of selling before the start of the Spring market.
According to the President of the Toronto Real Estate Board, “we are moving into a healthy market in 2011, which will continue to support growth in the average selling price of a home”. Many experts are anticipating a slight drop in unit sales volume in 2011, while experiencing a slight increase in the price of a home – this signifies a more balanced market for 2011. Historically low interest rates; supported by Toronto’s net influx of migrates and Toronto’s increased global stature translates into an excellent prognosis for the real estate market in 2011.