New Home Market
In the Kitchener-Cambridge-Waterloo (KCW) and Guelph areas, housing starts will be lower in 2016 and 2017 compared to 2015. There will be a greater decline in apartment starts (both condominium and rental) in KCW however, single-detached starts will increase slightly as the demand will remain strong and more land will become available for construction. The demand for more affordable homes has created a greater need for townhouses or smaller homes on smaller lots as an alternative to renting an apartment. The townhouse starts will remain close to the current 2015 levels to accommodate for the demand for more moderately priced homes.
The resale market will be balanced and stable in 2016. The tight resale market creates an environment where some home buyers are turning to the new home market for their purchases and bringing up the overall price of the newly completed homes. The population growth in the 50+ age group has been strong and they are more likely to have equity from their current homes to purchase new ones and are not as concerned with the trending price increases. The demand from in-migrants from the GTA is also high since they find these areas more affordable compared to the GTA regions.
Although vacancy rates for rental properties are rising slightly, the demand will remain strong for rental accommodations from downsizing households and young professionals. The gap between the cost of owning and the cost of renting will increase in 2016 and will lead to a reduced vacancy rate in 2017.
Mortgage rates are projected to increase slightly during the latter part of 2016. Employment is also projected to grow encourages renters to continue to rent for a longer period of time to save for a down payment. The projected slight increase in mortgage rates will encourage purchasing a home before the rate increase occurs.