Which factors could influence Ontario’s housing market this spring? Experts give their take
You’ve probably heard plenty about how a new mortgage stress test and an interest rate hike are affecting the Ontario housing market. But these are only some of the factors that could affect the market in coming months.
A provincial election, slippery debt levels, and surge of homebuyer demand could all play a role in where the market ends up this spring.
BuzzBuzzNews has rounded up the latest commentary from industry experts to make sense of the many elements that could affect the market in the spring.
Premier Doug Ford could cut an important tax
With a 21 point lead in the polls as of this week, it’s entirely possible that recently-elected PC party leader Doug Ford could become the next premier of Ontario. What would that mean for the Ontario housing market? A potential rollback of the foreign buyer tax.
“I believe in the market dictating,” Ford told the Globe and Mail earlier this week. “The market, no matter whether it’s the stock market or anything, it will always take care of itself — supply and demand.”
BMO chief economist Douglas Porter doesn’t quite see things the same way.
“How that can possibly be a top priority, especially given very compelling evidence that said tax played a huge role in deflating the Toronto housing bubble in the past year, is a mystery,” he writes in a recent note.
But Porter is also quick to point out that removing the tax probably wouldn’t shake up the market too much. The new mortgage stress test has already cooled things significantly in the first two months of the year. Porter speculates that the market would likely stay balanced if the tax was to be removed.
“But I wonder, what’s the advantage? Why risk it?” he asks.
Debt levels could be on their way down
Canadians have had some of the highest levels of household debt in the world for years. The Bank of Canada constantly weighs this fact when deciding whether or not to hike interest rates. But according to financial analyst Hilliard MacBeth, that might be changing.
“The Bank of Canada [has said] that…’Notably household credit growth has decelerated for three consecutive months,” writes MacBeth.
National Bank economist Stefane Marion maintains that, when placed in context, Canada’s level of household debt is not particularly worrisome.
In a recent note, Marion wrote that it’s important to consider that private credit in Canada includes Crown corporations, while the Bank of Canada also argues that loans between affiliated companies should be excluded.
“These adjustments alone reduce the Canadian credit-to-GDP ratio from 213 per cent to a much less threatening 170 per cent,” writes Marion.
Millennials are going to push prices up
Heading into the spring, BMO senior economist Sal Guatieri predicts that Ontario home prices will start to move upward as a result of Millennial home buyer demand.
“The perennially hot markets of Toronto and Vancouver are largely driven by the impact of Millennial home buyers creating price increases in the condo and townhouse markets,” he writes.
It’s not just Toronto that will be affected by this demand — Ottawa could see rising prices as well.
“We expect Millennials to bolster other markets like Montreal and Ottawa, as those looking for better affordability consider options beyond Toronto and Vancouver,” he writes.