The Spring 2010 CMHC Housing Report for Kitchener, Waterloo and Guelph forecasts that sales will continue at a strong pace before moderating later into 2011. New home construction will increase in 2010. Housing demand in this year will be supported by low mortgage interest rates, population growth and a strengthening job market. The resale market in both these regions will be very strong this year with sales of existing homes in Kitchener and Waterloo increasing to 9%, while homes in Guelph will show an increase half of Kitchener’s rate. The report speculates that, in 2011 sales will decline in Kitchener, Waterloo and Guelph due to increased mortgage rates and the introduction of the HST. This said, mortgage rates will be dependent on several economic factors, and low rates could very well help support housing prices into 2011. It should be noted that the HST will not affect the prices of resale homes.It is forecasted that new listings of resale homes will go up in Kitchener, Waterloo and Guelph in 2010 and will continue to remain at the same high levels in 2011.
With market conditions favoring sellers, more homeowners are deciding to list their homes for sale. This should continue in the first part of the year but will return to more balanced conditions in the latter part supporting a slower pace of price appreciation. Moreover, there will be a greater proportion of higher priced homes in Kitchener, waterloo, Cambridge and Guelph as move up buyers will favor homes in the higher price range. This growth, however, will slow down in 2011. Both single detached and higher density housing will show growth this year. If mortgage rates in Kitchener, Waterloo Guelph increase in 2011, there will be a slide in the resale market. In the Kitchener – Guelph area single detached housing starts will increase in 2010. Many homeowners have brought forward their home purchases fearing price rise with the introduction of the HST and higher mortgage rates. However with low mortgage rates new homes remain price competitive. Higher demand for new home construction will push prices further higher than they are. Construction will also increase for semi detached homes, townhouses.
Apartments starts will increase in Kitchener, Waterloo and Guelph due to an increase in demand for condominium apartments. Construction of other low rise housing types will also perform well in 2010. The economy is slowly recovering along with the job market. Employment in the Kitchener area is forecast to increase by 1% while that in the Guelph will increase by 2%. There is significant population growth in both these areas driven by organic labour increases, as well as migration. Of special interest, the areas diverse economy with solid employment rates has brought increase in international migration.
At the time of writing, the overnight Bank of Canada rate had fallen to 0.25 %. With the expectation of it to increase in the coming months mortgage rates have begun to rise. Posted mortgage rates are expected to increase in late 2010 given a rebounding economy. mortgage rates could increase faster if the economy recovers and or could subdued if the recovery is slower than expected.
Comments