Hamilton housing market expected to see ‘slow recovery’ from sharp downturn
A senior analyst for the Canada Mortgage and Housing Corporation (CMHC) says Hamilton's housing market is expected to make a slow recovery" after experiencing a sharp downturn last year.
CMHC senior analyst Anthony Passarelli told The Spectator that Hamilton home prices have likely already bottomed out" and are forecasted to start trending upwards this year as sales activity makes a return.
However, Passarelli noted that price growth will be more restrained than during the pandemic, when demand skyrocketed as mortgage rates fell to historically low levels.
That all changed in March 2022, when the Bank of Canada began hiking interest rates for the first time since October 2018. The market continued to cool as rates went up eight times between then and January 2023 to 4.5 per cent, but they have since held steady.
We don't see price growth like we saw in the last few years," said Passarelli. We think prices will recover, but at a slower pace."
In Hamilton, the latest report from the federal housing agency - released Thursday - forecasts between 9,500 and 11,000 sales for this year, with an average price of $825,000 to $915,000. For 2024, the report forecasts between 11,800 and 13,800 sales in the region, with an average price of $840,000 and $970,000.
Passarelli said while the agency expects mortgage rates to stabilize this year, they are not predicted to drop to previous levels. While that steadiness will draw some back into the market, the overall level of housing affordability has eroded, he noted.
Potential buyers are worse off because of the amount that rates have increased," said Passarelli. And it's going to play into that slow recovery."
The report also forecasts a decline in housing starts - a measure of when construction on homes begins - for Hamilton.
While between 3,600 and 4,200 homes are expected to start being built this year, that number will drop to between 3,000 and 3,800 in 2024, according to the report.
Passarelli said much of what is being built this year was sold before the market cooled, while the coming years will see more of the effects" of the downturn, with those housing projects taking longer to sell.
They may be delayed in putting shovels into the ground," he said. There is also a lot of talk about labour shortages and costs being higher for builders."
While the housing market outlook primarily looks at the new home market as well as the resale market, a portion of the report also focuses on the national rental market.
Passarelli said the region's rental market continues to be squeezed, with many renters unable to make the jump into home ownership due to high mortgage rates and spiralling rents.
Recent data from Ratehub.ca showed that a Hamiltonian would need to earn a salary of $165,940 to purchase an average-priced home in the region.
And earlier this month, a national rent report from Rentals.ca found that two-bedroom flats in the city were renting for an average of $2,266 in March.
Passarelli said the inability for many to exit the rental market plays into other pressures, such as increased competition for a limited amount of units, which has led to rising rents in the city.
The cost of a two-bedroom unit is predicted to jump by more than 20 per cent between tenants. That means many renters will remain in their apartments and accept regulated rent increases, Passarelli added.
We don't see the situation improving," he said. It doesn't look good."
Passarelli said the vacancy rate for rentals in Hamilton is expected to remain relatively low," noting that while new apartments are slated to be built, the sheer level of demand will offset the number of additional units.
He added that the number of renters in the city will also continue to grow, pointing to a rise in national immigration targets and the erosion of housing affordability.
The rental demand is going to be very strong," said Passarelli. We need to build quite a bit more units."
Fallon Hewitt is a reporter at The Spectator. fhewitt@thespec.com