Graphic: Ontario’s largest housing markets post significant gains over past decade, says RE/MAX INTEGRA Ontario-Atlantic Region (CNW Group/RE/MAX Ontario-Atlantic Canada)
Ontario Housing Market Posts Significant Gains Over Past Decade
MISSISSAUGA, ON, Feb. 7, 2018 /CNW/ – Low interest rates, population growth, investment and unprecedented equity gains all combined to spark one of the strongest decades for price appreciation in Ontario’s six largest housing markets, according to the Decade in Review Report released today by RE/MAX INTEGRA, Ontario-Atlantic Region.
Between 2007 and 2017, the six largest markets in the province experienced substantial growth despite some serious challenges that included a financial crisis and subsequent recession. RE/MAX found that housing values more than doubled in the 10-year period in the Greater Toronto Area and Hamilton–Burlington, while average price rose 81 per cent in Kitchener-Waterloo; 63 per cent in London–St. Thomas; 62 per cent in Windsor; and 44 per cent in Ottawa.
| Residential Average Price Appreciation | |||||
| 2007-2017 | |||||
| Market | 2007 | 2017 | % change | CAGR* | |
| Greater Toronto | $376,236 | $822,681 | 119 | 8.14 | |
| Hamilton-Burlington | $274,798 | $576,418 | 110 | 7.69 | |
| Kitchener-Waterloo | $252,429 | $457,415 | 81 | 6.12 | |
| London-St.Thomas | $202,908 | $330,037 | 63 | 4.98 | |
| Ottawa | $273,058 | $392,474 | 44 | 3.69 | |
| Windsor | $163,215 | $264,750 | 62 | 4.96 | |
| Source: Local Boards, CREA | *Compounded annual growth rate | ||||
“Lower borrowing costs helped to jumpstart the province’s real estate engine, creating one of the most dynamic housing markets in recent history,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX INTEGRA, Ontario-Atlantic Region. “For existing homeowners, especially those who purchased early in the decade, the equity gains realized have exceeded all expectations.”
Tight housing market conditions initially presented in the Greater Toronto Area and neighbouring Hamilton–Burlington, but the ripple effect made its way along the 400-series highways and into markets such as Kitchener-Waterloo, London–St. Thomas, Windsor and Ottawa by the end of the decade.
Housing sales also ramped up during the latter half of the decade, with many markets shattering existing records as demand outpaced supply. The Greater Toronto Area topped 100,000 unit sales in 2015 and 2016; Hamilton–Burlington surpassed 16,000 unit sales in 2015 and 2016; Ottawa reported sales over 17,000 units in 2017; London–St. Thomas crossed the 10,000 unit sales threshold in 2016 and 2017; Kitchener-Waterloo reported sales over 5,000 units in 2015, 2016, and 2017; and Windsor topped 6,800 unit sales in 2016. As inventory dwindled, bidding wars erupted, placing upward pressure on prices.
“While equity gains further bolstered the move-up market, affordability concerns emerged,” says Alexander. “Limited inventory was reported in Hamilton–Burlington, Kitchener-Waterloo, London–St. Thomas, Windsor and Ottawa, as first-time buyers, especially those interested in single-detached homes, ventured outside of the Greater Toronto Area. At one point, one in every four buyers in Hamilton–Burlington was from the GTA.”
Investment also factored into the home-buying frenzy, with foreign investment climbing as the Canadian dollar tumbled, explains Alexander. The low interest rate environment stimulated domestic investment as well. Ontario’s strong economy, firing on all cylinders during the latter half of the decade, served to attract buyers from other provinces. Immigration continued at a steady pace, with the vast majority of newcomers to Canada choosing to settle in Ontario. As a result, population growth accelerated in the province over the last decade, with Statistics Canada reporting a 5.7-per-cent increase between 2006 and 2011 and a further 4.6-per-cent uptick between 2011 and 2016. With 13,448,494 people now calling Ontario “home,” the province houses approximately 38 per cent of Canada’s total population.
The culmination of the aforementioned factors led to the run-up in values. While Toronto remains the most expensive city in the province, with an average price of $822,681, Hamilton–Burlington runs a close second at $576,418. Both markets have experienced steady upward price appreciation since the mid-1990s and the trend is expected to continue.
Affordability will play a major role in the future of housing, as buyers seek refuge from higher values in larger centres. At present, Windsor—Ontario’s most affordable metropolitan market with an average price of $264,750—London-St. Thomas, Ottawa, and Kitchener-Waterloo all offer single-detached homes at reasonable price points. Sales of condominiums are also gaining traction in these centres. Improved economic fundamentals, combined with greater employment opportunities, are expected to keep these Ontario housing markets humming.
“This past decade has been exceptional for housing, with the annual rate of return in five of the six housing markets outperforming most other Canadian investment vehicles between 2007 and 2017,” says Alexander. “Moving forward, the stage is set for continued growth, but at a somewhat slower pace. More stringent lending criteria and the new government stress test will present some challenges in the short-term, but we believe home ownership will continue to be top of mind with Canadians in the long run.”
In Windsor
Retirees, empty nesters and relocating families in search of affordable housing have buoyed home-buying activity in Windsor-Essex in recent years. The city is one of few in Ontario where a person can still buy a single-detached home in the $100,000 range. As a result, strong demand and a limited supply of homes listed for sale continue to characterize Windsor-Essex’ resale housing market. Over the past decade, the average price of a home has increased 62 per cent—rising from $163,215 in 2007 to $264,750 in 2017—with a compounded rate of return of 4.96 per cent.
Population growth continues to accelerate, increasing at the fastest pace in the province between 2011 and 2016—up 3.1 per cent over the 1.3-per-cent decline in 2006 to 2011. According to the 2016 Census, the Windsor Census Metropolitan Area (CMA) also had one of the highest home-ownership rates in the country, sitting at 71.7 per cent. Economic fundamentals remain strong, led by a robust automotive industry. Numerous construction projects include a highway for the new Gordie Howe Bridge, Customs Plaza and new span for the Ambassador Bridge, with the federal government finally green-lighting a six-lane replacement.
New-home construction has also surged in recent years. However, inventory remains a serious issue with a shortage of homes reported in both the resale and new home markets. Demand for properties—especially those priced between $120,000 and $280,000—has been exceptionally brisk, with many homes selling at or above list price with multiple offers. Construction delays have also been reported in new home sales as a result of a shortage of skilled trades, which has contributed to the upswing in demand for resale product.
New businesses are opening, including fashionable new wineries, tasting bars and restaurants. Existing industries are diversifying, and there’s talk of Windsor becoming a transportation hub, given its close proximity to the US border. Warehousing is also a major topic of conversation.
It hasn’t all been smooth sailing. While residential real estate markets were challenged across the board in 2008, the impact of the looming recession was especially pronounced in Windsor-Essex. Against the backdrop of a faltering automotive industry, the average home price in Windsor-Essex hovered at $163,215 in 2007, falling short of that figure in 2008 and 2009, before bouncing back in 2010. Population figures declined 1.3 per cent between 2006 and 2011, and unemployment rates in Windsor-Essex were among the highest in Ontario. Sales during that period remained flat until 2010, gradually increasing until 2015 when the number of homes sold jumped 20 per cent or more for three consecutive years, in 2015, 2016 and 2017.
Employment opportunities and affordability will continue to draw homebuyers to Windsor from other parts of the province in the coming months. The number of homes sold is expected to hold relatively steady, while housing values are forecast to climb once again, albeit at a slower pace than in 2017.
SOURCE RE/MAX Ontario-Atlantic Canada
