It's been quite the year for the housing market in Ontario, from sales and price fluctuations to supply concerns to rising housing costs. As 2019 approaches, here are five things we can learn from real estate in 2018.
Get used to the affordability issue
Key economic fundamentals such as population and employment growth will continue to drive housing market demand. Over the next decade, almost 700,000 first-time buyers will target the Greater Toronto Area (GTA) or Hamilton markets, according to a report from the Ontario Real Estate Association. Meanwhile, the supply of new homes is not yet being addressed, which contributes to rising prices.
With recent interest rate hikes and other changes, sales and prices in the GTA saw some moderation in 2018. But this will be short-lived, and a return to price growth is expected.
Increased government involvement, finally
Government lobbying by BILD and TREB seems to be paying off, in the sense that the Province is increasingly aware of the issues facing the industry, and buyers.
In late November, Ontario announced it was committing to a housing action plan "to help create more housing faster, give people more choice and bring down housing costs."
Like anything involving government, though, this process will likely be slow moving, meaning some of the challenges, namely increasing housing supply, will take time to be resolved.
But at least the issues are on the agenda.
One real example of this improved awareness is Ontario's recent plan to change the 40-year-old apprenticeship system in the province.
This move is a game changer because the new one-to-one ratio, a significant change from the existing three-to-one ratio, will enable home builders and renovators to more easily hire and train new apprentices. Besides creating more job opportunities for trades workers, the move also helps builders and renovators operate their businesses
Fixing on interest rates
Canada's major banks, as is usually the case, responded by immediately raising their own rates.
Naturally, all of this has Canadians feeling a little uneasy.
The Conference Board of Canada's latest Index of Consumer Confidence confirms that rising interest rates and weaker wage growth have started to take their toll on confidence. With interest charges squeezing Canadian wallets and weakening wage growth offering little reprieve, consumers have become hesitant to make major purchases and are less positive about the state of their finances.
In its latest rate announcement on December 5, the Bank of Canada noted that global economic expansion is slowing, and the effects of the "oil price shock" are being monitored.
James Laird, co-founder of interest rate comparison website RateHub, says, "We expect that the Bank will not move the overnight rate until the effects of the declining energy sector are known. However, the Bank makes it clear that they still plan on raising the key interest rate in 2019, likely more than once."
Real estate is more local than ever
Real estate is local, and in 2018, it became more local than ever.
What do we mean?
Well, the Canadian Real Estate Association (CREA), Canada Mortgage and Housing Corp (CMHC) and other major real estate bodies are mandated to oversee the national market.
Forget the national headlines.
It's essential to remember, however, that when you buy a home, you don't buy the national market. You buy one house, on one street, in one neighbourhood, in one city and region.
If you live in Ontario, why do you care that Alberta's ongoing oil industry struggles are pulling sales and prices down in markets in that province? Or that prices in Vancouver are even less affordable than in Toronto?
Forget the national headlines. Drill down into what's happening in yourmarket.
Lessons from Oshawa
General Motors Canada's November announcement that it was closing its Oshawa assembly plant sent shockwaves not just through the province but all of Canada. To be sure, the loss of at least 2,500 jobs, not to mention untold positions in related suppliers, in a community of 170,000, is likelyto hurt. Hurt whom, and how badly, are the only questions.
This development should serve as a stark reminder to us all of how important it is for cities to develop diversified, modern economies. Over-dependence on a single industry leads to overexposure in the case of downturns or, in GM's case, outright shutdowns. It hurts the local economy, which impacts employment and wage growth, which impacts the housing market.
Thankfully in recent years Oshawa has been diversifying its economy and expanding in technology, education and other industries. It will help, but the impact of the GM closure will likely play out over many months, if not years.
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These developments could push housing in Oshawa into a buyers' market, and prospective buyers could benefit from more options and softening prices.
In new homes, builders remain undeterred, encouraged by the longer-term growth and development throughout the Durham Region. Still, some may offer incentives such as discounts or inclusions to entice qualified buyers.
Borrowing from that old adage, if we can remember these important lessons from 2018, history may not repeat itself in 2019.
A version of this post, by Wayne Karl, was originally published on MyHomePage.ca
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