9 Jun 2011

Home values may soon decline in Toronto

As more people move to Toronto and buy storage units to house some of their belongings, a new report is indicating that the homes they live in may decline in value.

According to BMO Capital Markets, the market may weaken in Toronto if mortgage rates rise and inflation occurs as economists expect.

"Given our outlook for a moderate increase in rates in the next two years, prices could soften or at least stabilize for a while [in Toronto]," said Sal Guatieri, senior economist at BMO Capital Markets. "A possible overhang of condos could aggravate the weakness. However, continued sturdy immigration, with one-third of the nation's immigrants settling in the GTA last year, should help to cushion the blow."

While this projection may be bad news for people who are selling their home, it's good news for people who are considering moving to the city. But even if prices don't decrease, the high cost of homes in the GTA doesn't appear to be affecting home purchases, as the Toronto Real Estate Board reported sales increased 6 percent last month compared to May 2010.

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