Canada’s housing market will continue to stay hot for the rest of the year, with home prices expected to rise on low interest rates and increased demand, says a report by TD Economics.
The bank upgraded its forecast for the real estate sector early this month, predicting that home prices will gain an average of 5 to 6% by the end of 2014.
“More strength may be bubbling under the surface,” said TD Economist Diana Petramala, author of the report.
In February, the bank had expected Canadian home sales to flatten out, and called the market overvalued by about 10%. It did not give an estimate on how much it thought prices would rise or drop. That earlier forecast was based on the belief that mortgage rates would creep up in the spring, but rates still sit near record lows and continue to prop up demand.
Low interest rates have helped with the affordability of condos, where prices are at their “most favourable.” First-time buyers who may have been pushed out of the market earlier may also be returning back due to the rates, which have, in part, driven the demand for single-family homes.
In May, the national average resale home price grew 7.1% year over year – surpassing its 10-year average growth rate.
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