On Thursday morning more than 450 BILD members gathered at Bellvue Manor for an expert presentation about where the economy and the housing market are headed as we move towards 2013.
We were joined by Benjamin Tal, the Deputy Chief Economist of CIBC World Markets Inc. and Peter Norman, Chief Economist at Altus group. Benjamin Tal spoke about how world markets, particularly in the Eurozone and China, will affect the Canadian housing market while Peter Norman tracked housing starts and prices over the past decade. Both were extremely insightful and a pleasure to listen to.
As for the key takeaways, Tal stressed that the only thing that would cause a real housing market crash is a very sudden extreme rise in interest rates. A gradual increase in interest rates, which we’re more likely to see, would result in only mild adjustments to housing sales and prices. Natural fluctuation like these are not what we’re concerned about. Peter Norman took us through some really interesting data that showed relatively short-term effects from changed mortgage rules, whether the rules made getting a mortgage easier or harder.
The fact that there has been a slight slowdown in home sales indicates that consumers are thinking twice before buying – something that is good for the market and the economy as a whole. The GTA effectively has two housing markets; the condo market and the single family home market. If there is a real slowdown in sales, the luxury condo market will likely be the first casualty. The media also has a hand to play, and Tal pointed out – to applause – that they need to be responsible in the way that they talk about the housing market.
It all goes back to consumer confidence, which we talked about on the blog recently in relation to August home sales. Both speakers brought up this issue and agreed that consumer confidence does play a role in the market, but it’s notoriously difficult to measure. This is why we caution against doom and gloom headlines.
Tal predicts a slight drop in new condo construction, but doesn’t think we’ve been overbuilding. It’s clear that condos have come to replace the apartment building for the rental market. We’re also going to need all of those units (and more) as baby boom downsize and Toronto becomes home to immigrants from all over the world to the tune of 100,000 people per year, many of them highly educated. There’s even an article about the phenomenon in this month’s Toronto Life magazine. The story is worth a read but it’s only in the print edition.
Peter Norman noted that affordability will continue to be an issue going forward, but that making more land available for development will increase choice and therefore make homeownership more available to more people, as well as help with accommodating all the newcomers the GTA is expecting in the coming years.
Once again a big thank you goes out to Benjamin Tal and Peter Norman for spending the morning with us.