toronto-real-estate-question

Photo: Colin Kinner/Flickr

The 1990s were dark days for Ontario real estate — after the Toronto market peaked in ‘89 amid rampant speculation, the bubble burst and prices plummeted.

A leading economist now suggests in at least one way, Ontario’s housing market will reach late-’80s heights in about two years, which doesn’t bode well for Toronto real estate if history repeats itself.

In a research note published today, BMO Senior Economist Robert Kavcic has presented what percentage of Ontarians’ incomes have gone towards mortgage payments going all the way back to 1983, and come up with a two-year projection.

ontario-mortgage-chart

Chart: BMO Economics

While Kavcic’s study spans the entire province, roughly half of Ontario’s population can be found in the Greater Toronto Area, which is also the nation’s most-active housing market.

At the Toronto market’s last peak, mortgage payments in Ontario equalled more than 80 per cent of the income of workers in the province.

Mortgage payments have been calculated by averaging the one- and five-year posted rate, and assuming a 25-year amortization period and downpayments equalling half of a borrower’s annual income.

“Assuming stable mortgage rates and continued income growth, we’ll be at 1989 valuation levels in about 24 months,” Kavcic projects.

Supply and demand fundamentals drove Toronto home prices for years after the Great Recession, he notes. But that is no longer the case.

“The six-year housing bull market through early-2016, despite constant bubble mongering, was fully driven by fundamental supply-demand strength,” he explains.

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