Is the GTA on the Verge of Market Moderation?

06 Dec
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Is the GTA on the Verge of Market Moderation?

The GTA housing market can be a volatile place for buyers, sellers and investors. It is a market prone to bidding wars, high prices and Government intervention. Recently, the Canadian Mortgage and Housing Corporation (CMHC) surprised many by predicting that the national real estate market would moderate over the next two years.

For those in the market or looking to enter, the question is what does moderation mean exactly, and is it a positive or negative?

Market Moderation

A forecast predicting market moderation is essentially saying that prices will drop (or at least stop rising), and come more in-line with the economy. An example provided by CMHC suggests prices for single and multi-unit properties to fall in the range of $501,400 to $521, 600.

The reasons for this moderation are current housing prices, borrowing costs and inventory. Another contributing factor is an aging population who will be looking to downsize in the coming years. In addition, the affordability of condos and apartments versus single-detached homes will drive down prices and cause the market to plateau, which will lead to moderation in 2019.

An Economic Precursor

Market moderation often means that Canadians might be vulnerable to high debt loads. This is an ongoing issue for households and market moderation could be a precursor to greater economic turmoil. If one more domino falls—the job market dries up, the Canadian dollar plummets—then this debt load could spell trouble.

For some, market moderation can make the dream of home ownership a reality. For others, it means they that could be exposed to financial issues or might have to wait to sell the property they currently own. For first-time buyers, it could present an opportunity to enter the market.

Market moderation is too complicated to simply label as good or bad. It needs to be viewed in a broader sense along with the economic factors driving it and its potential ripple effect. This situation bears watching and it’s important to understand that real estate is often regionalized and can still increase or decrease in value independent of a supposed market moderation.