The Greater Toronto Area has experienced 15 plus years of unprecedented price increase. Few can argue that the major catalyst behind this surging market has been our historically low interest rates. How much longer can they remain at these historic lows, remains the $64,000 question?
While oil prices remain below $50.00 US, Bank of Canada governor, Stephen Poloz will have little choice but to keep domestic interest rate increases to an absolute minimum. Despite the widening of rates between Canada & the United States.
The Loonie will likely weaken further over the first part of the New Year as posted central bank rates drift further apart. The possibility of experiencing the loonie as low as 65 cents US, is a distinct possibility. currency markets have a historic tendency to over shoot their Mercator poles. Bad news for snowbirds but hopefully good news for manufacturing exporters (BBd-B). Hypothetically the Loonie should settle in a mid-term trading range of 72 to 78 cents, as oil returns to that $45 to $60 range.
What does this mean for the housing market? Well short of a Macro Black Swan Event happening! Job creation should remain steady if not modestly robust especially in the service sector. This will be most noticeable in South Western Ontario.
This combined with the near 300,000 new Canadians scheduled to arrive in 2016 will further drive the R.E. Market upward. Will we experience another 10% plus gain in housing prices? This is very difficult to fathom but not impossible to imagine, if all things remain equal. If rates were to rise modestly this will fuel unbridled speculation within the housing market.
Bill Morneau has recently announced that homes over $500,000 require at 10 % down payment. This new degree is supposed to slow the manic housing markets of Vancouver & Toronto. It is highly logical to argue that this bill will actually have the opposite effect. Particularly for detached /semi detached homes still available in the GTA. This obtuse catalyst for mid to low end homes, is analogous to heating a test tube with a Bunsen burner. The bottom will push the market forward.
Compliment this anticipated rush of 5% down buyers below 500k mark, along with the tens of thousands of New Canadians that have an innate distrust of Governments & their announced policies. We genuinely have the makings of a Forty Niner gold rush in the housing market.
New Canadians by and large strive as quickly as possible to buy a chunk of the Canadian Mosaic by purchasing a home. This age old phenomena is not likely to change any time soon.
So presuming interest rates do not rise by a point or more. Job creation remains steady. Then the direct beneficiary of this rising tide will be the G.T.A housing markets.
Please keep in mind that Old Caveat “What goes up must come down”. Canadian debt levels are have spiraled out of control, so do spend wisely. Remember value still counts!