2011 Real Estate Might Cool
Tony Wong – Yourhome.ca
The Toronto real estate market will continue to do well in 2010 before retrenching significantly next year, a CMHC forecast says.
Sales of new homes in the Toronto area are expected to rise 30% compared with 2009, while existing home sales should be up 2.5%, according to a report released Tuesday by the Canada Mortgage and Housing Corp.
“We have entered this year with significant amounts of momentum as a number of temporary factors have boosted sales and prices in recent months,” CMHC economist Ted Tsiakopoulos said.
“But moving forward, the rate of appreciation will slow down as you have higher mortgage carrying costs, less pent-up demand and increasing supply pressures.”
The market this year will be the flip side of last year, which saw the market flounder in the first half before rocketing upward in the second half, CMHC analyst Shaun Hildebrand said.
“This year will be a very good first half, followed by a slower second half. Right now, we are having exaggerated rates of price appreciation as supply is tight and interest rates are low,” Hildebrand said.
The Bank of Canada left its key overnight rate unchanged at 0.25% Tuesday, but adopted a more hawkish tone, suggesting that interest rates would go up sooner than later.
Meanwhile, housing starts and residential construction have trailed the existing home market, but low interest rates mean that single detached starts should do well in the first half of the year, CMHC said. As affordability becomes more of an issue, demand is expected to shift in the second half to condominium and row housing.
“The residential construction side of the equation is still in the early stages of recovery and we haven’t seen as much of a pickup as in the existing home market,” Tsiakopoulos said.
Amid a robust first half, CMHC expects sale prices to be up significantly this year by 8.5% compared with last year.
The average price of a home is expected to hit a record $430,000.
However, price appreciation and sales are expected to decline as the market slows in the second half of the year.
In a first look at 2011, the federal housing agency says existing home sales will drop to 83,000 units, possibly falling by 9.3% compared with 2010, while the new-home market is predicted to drop by 10.1%.
“By that time, listings should have caught up and you will have more supply on the market, which should take some steam out of prices,” Hildebrand said.
Despite the drop in sales, the CMHC still expects existing home prices in the Toronto market to rise by 2.5% or $439,755.
“We are looking at prices to rise by roughly the rate of inflation,” Hildebrand said.
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