This market is a hard one to read. What we do know is that there are a lot of listings on the Toronto Real Estate Board and the biggest surplus sits in the downtown condo market! We also know that there are a lot of buyers sitting on the sidelines – waiting for the good deals to appear. Who will blink first?
Will sellers, who have already made good returns from a run up in prices over the past few years, sell into a falling market (our best guess is that prices will come off about 5% from the peak reached in early April of this year? Will buyers hold out for even lower prices? Some economists think a 20% drop is possible.
One thing I do know is that a quarter point increase in the Bank Rate is not going to have any effect. With a continuing weak U.S. economy and the European financial crisis, it seems that any significant interest rate increases will be put off to 2011 at the earliest. What does seem to catch investor eyes is the poor stock market performance. Buying real estate is a much better and less volatile option for many investors.
The coming HST has upset most people in Ontario. However it does not impact the resale market and when the smoke clears, I am sure that most developers will bury it in new residential sales. My view is that this will be less of an issue than first feared.
My best guess is that the real estate market will remain fairly active, but of course at lower sales volumes than the first five months of this year. What do you think? Are there any further market surprises yet to be factored into this market?