Canada Mortgage and Housing Corporation predict the sales of several property types will slow slightly in 2016 in the Ontario market. This is because they expect the previous increase due to investments in the east from our lower Canadian dollar and decreased activity in Alberta from lower energy prices will level out.
Bob Dugan, chief economist at CMHC, said one of the property types affected is single-family homes, but the correction will be nominal. They estimate a three per cent drop in sales in 2016 and less than one per cent in 2017. Single-family homes can still expect nominal price increases of around 1.3 percent, compared to 7.2 percent last year.
Other property types are expected to drop slightly too. New home construction will decrease in 2016. CMHC predicts builders will curb new projects so they call sell off their existing inventory. Once again, CMHC doesn’t foresee a massive correction; 4.7 per cent in 2016 and 2.5 per cent in 2017.
Developers will continue to build condominiums and stacked townhouses in high-density areas such as Toronto. High land prices will focus builders on infill developments and redevelopments instead of new construction.
Buyers will also turn towards properties in high-density areas that require more renovations and upgrades to see a return on investment. High-end luxury housing will still sell, but record high sale prices will also push buyers to outer areas where housing is more affordable.
Property types such as condos and rental apartments are still a solid bet in many parts of the country, particularly the Greater Vancouver and the Greater Toronto Area. Many retiring baby boomers choose to permanently rent or buy a smaller home to capitalize on their home equity.
In Ontario, greenbelt legislation to conserve 1.8 million acres of land will undoubtedly drive up housing prices even further. Residential areas away from the core with shopping, schools and employment may lure prospective buyers away permanently. Purpose built, multi-unit rentals are also a good property type for Generation Ys and Millennials looking for smaller spaces and green areas for recreation, providing they are also on transportation hubs.
While the housing market will see a modest decrease, interest in commercial real estate in the east will probably rise. Property types such as a warehouses, neighborhood shopping centers, or office building may offer greater returns, particularly for foreign investors taking advantage of the lower Loonie. Recent trends also include splitting office space into smaller areas to accommodate the decreased needs of business due to the internet. Many businesses now choose a cubicle over a sprawling, costly office to service their global clientele. Retailers now choose to sell online and lease distribution centers instead of shouldering the costs of a brick and mortar store.
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