TORONTO -- The hot Toronto real estate market is headed for a soft landing next year -- not the bust that some might fear -- a new report by Canada Mortgage and Housing Corp. predicts.
"I see a slower pace in housing sales and price growth in 2003, but it will still be very healthy," said Ted Tsiakopoulos, a senior analyst with CMHC who specializes in the Toronto market.
The latest forecast released yesterday by the federal agency sees resale numbers falling by 6.6 per cent to 70,000 next year from an expected record high of 75,000 this year.
New home sales will fall by 9.4 per cent, it said, to 48,000 from a forecast of 53,000 this year.
Mr. Tsiakopoulos said historically low interest rates, a steady flow of new residents to the Toronto area, and the search for sound investments given the current mistrust of the equity markets will all help to prevent a rapid cooling in the residential real estate sector.
"Investors want to invest in a tangible asset, and real estate is taking on that role," he said.
As well, Mr. Tsiakopoulos pointed out that, aside from the sharp jump in sales in January and February of this year, the growth in the Toronto residential market has been steady over the past seven years. There has not been the rapid, broad-based runup that typifies a boom-bust cycle, he said.
Michael Gregory, assistant chief economist at Bank of Montreal agrees, saying that any rise in interest rates will not be enough to cause the major price correction typical of previous boom markets.
"Given confidence levels and personal income growth, I think home buyers can weather a little increase in interest rates," he said in an interview yesterday.
The CMHC forecast predicts that an increase in new listings combined with a slowing in the pace of sales will mean a more moderate increase in housing prices next year and fewer bidding wars. The average resale home should sell for $290,000 next year, up just over 5 per cent, it said. That compares with a 9.4-per-cent jump in the average price this year to $275,000.
Mr. Tsiakopoulos said the boost the housing market received from low interest rates has "pretty much played out."
As a result, he expects more moderately priced neighbourhoods in Ajax-Pickering, Brampton and Toronto East, will see demand increase as buyers look for more affordable properties.
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