Ontario forecast calling property investors home

"I don't agree with fears that record house prices are signs of a price bubble that must soon burst," said Helmut Pastrick chief economist for Central Credit Union. "While price levels are high relative to incomes, low interest rates are keeping mortgage carrying costs manageable. I expect rising rates will dampen demand a bit, but economic growth and growing employment will offset that decline."

That dampening effect should slow the movement of renters into homeownership, more specifically the condo market. The thinking is higher borrowing costs coupled with higher prices should cool their jets. And, indeed, prices are going to rise, according to the report.

Central 1, the financial facility and trade association for the B.C. and Ontario credit union systems in its report, Ontario Housing Outlook 2012-2014, predicts average house prices will increase about 3.4 per cent this year to $378,700, another four per cent to $393,000 in 2013 and 2.6 per cent to $403,200 in 2014. It also estimates that MLS home sales will rise two per cent to 204,400 units this year, stronger than earlier forecast. Sales will rise to 207,200 units in 2013, before dropping slightly to 205,000 in 2014.

"We expect prices and sales will continue to grow for the rest of 2012 and through 2013," said Pastrick. "Central 1's forecast is for Ontario's economy to grow moderately in coming years and the housing market will keep pace. Sales will slow a bit in 2014 but prices will keep rising."

The report also Ontario's Gross Domestic Product to grow by 2.4 per cent this year, 2.7 per cent in 2013 and 2.4 per cent in 2014, led by private sector activity, as governments at all levels struggle to trim their deficits.

Interest rates will remain near historic lows, even as they start to rise next year, keeping sales moving and prices rising, Pastrick said

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