The Canadian Mortgage and Housing Company report for London Ontario indicates that the resale and new construction market will demonstrate improvement over 2010. Mortgage rates in London will remain low, but increase more quickly if there is a stronger economic upturn. Specifically, housing starts will total 2,370 while total MLS sales will hit 8,700. This solid activity, however, may come at the cost of a volume slowdown in 2011 for both sectors in the London Ontario market. The report indicates modest price growth in 2010 and 2011 supported by a balanced resale market. Employment improvement should be steady at 1.5 % in 2010-2011 however unemployment rate will remain below typical London area highs. MLS sales in the London market will increase by 5% in 2010 thanks to first time buyers. However this activity will ease later in the year due to HST on new home purchases, rising prices and possible higher mortgage rates in London. Moreover, the ‘borrowing’ of future demand may limit the number of potential buyers in 2011 in the London market. Overall, there will solid demand of resale homes as homeownership will continue to be accessible in London.
New listings will rise in 2010, however the slower housing price growth in 2011 may result in a decline of new listings. Strong first time buyer activity will keep sales of properties in the lower price ranges strong. As a result of this trend, the average resale price will increase just over 2% in 2010-2011. New home construction in London Ontario will rise by 9% in 2010. Demand for single detached homes will be strong with the improvements in the labour market. Over the medium term, an abundance of land in London will keep the new home price growth balanced and stable over next 2 years. Rental apartments may sustain have higher vacancy rates. Thus rental apartment construction should decrease sharply. With rising London mortgage rates, buyers may search out less costly options, such as townhouses, which will increase construction over 2010-2011. With respect to unemployment, the rate is still quite high in 2010-2011. This said, the manufacturing and automotive sector should begin to recover steadily. Wages for the healthcare sector have also shown recovery after lowering over the past year. Importantly, full time employment in the 45-64 year age group is well on the rise which is a good indication of strong repeat buying in all London Ontario housing markets. If mortgage rates remain low, this will also help provide impetus for second or third time home buyers in London.
At the time of writing, the overnight Bank of Canada mortgage rate is at 0.25%. It is expected that mortgage rates will increase in late 2010. With expected rise in the overnight rates, the mortgage rates have begun to rise. Rates could increase faster if the economy recovers more quickly. However a modest economic recovery will stunt the mortgage rate increase in London.
