After edging higher in 2008, Ontario new home construction will slow, reaching 58,250 units in 2009. A gradual recovery in Ontario’s economy will push starts modestly higher in 2010. Housing starts have been running above demographic trends recently and this trend will be reversed in the next few years.
As a leading indicator of residential construction activity, moderating demand for existing homes points to weaker new construction activity in Ontario. Declining employment opportunities, more cautious consumer spending and rising home prices in recent years are other factors that will weigh on housing demand.
Ontario’s economy likely contracted at the close of 2008 and will contract further in 2009. Economic growth will recover but only gradually in 2010. Slower US consumer spending will continue to impact Ontario, but the negative effects on international trade will dissipate later this year thanks to a lower Canadian dollar and a gradual US economic recovery. This means that while exports continue to weigh on Ontario’s economy, exports will be less of a drag by 2010. Instead, slower consumer spending, owing to a slowing provincial labor market, will dampen Ontario’s recovery. While a moderation in consumer spending will dampen service sector employment opportunities, service sector employment levels will be stronger than in the goods sector.

In Detail

Single Starts: Single starts will decrease to 23,000 and 24,000 units in 2009 and 2010, respectively, down from over 31,000 starts in 2008. A slowing job market and a rising unemployment rate, particularly in higher paying employment sectors, means consumer spending will slow. This will have a more adverse effect on the relatively more expensive single detached housing.

Multiple Starts: Similarly to single detached starts, multi-family home starts will slow, but at a more modest pace reaching about 35,250 units this year and next. Less expensive multi-family homes, led by ownership and rental apartments, will be relatively more attractive.
First time buyers considering less expensive homes and lower rental apartment vacancy rates will sustain the construction of apartment and townhome units.

Resales: Ontario existing home sales will decline reaching 144,000 units in 2009, down from over 180,000 units in 2008. A pick-up in job growth, consumer spending and affordability will lift existing home sales in 2010. Rising home prices in recent years, combined with declining pent-up demand, will move volumes lower and closer to levels registered earlier this decade.

Prices: More accommodating conditions for buyers suggests Ontario existing home prices will decline by 3.5 and 1.0 per cent in 2009 and 2010, respectively. A slowing job market will dampen income growth and demand for housing. The continued shift to more inexpensive housing will also dampen average home prices across the province.

Bottom line by Jan Luistermans & Moishe Alexander: As you see the prices are not Falling like a rock (like in the US), this is good for investors, but they are easing and this year might be just the perfect time to move from rental and buy your first home, knowing that you pay cheaper, but not fearing that you will not be able to sell it for as much.