Canada’s national housing agency is forecasting Toronto region home prices to rebound in the next two years, rising as much as 5 per cent in 2020 to an average of between $765,300 and $898,400

This year is predicted to end with prices averaging between $740,600 and $854,600.

It predicts prices could average as much as $949,400 by the end of 2021, a 10.5 per cent increase over this year.

Sales and new home construction, led by the highrise sector, are also expected to fully recover after the market lull of the last two years, according to the annual Housing Market Outlook from Canada Mortgage and Housing Corp. (CMHC) released on Thursday.

The complex geopolitical landscape, including an upcoming U.S. election, trade wars and Brexit, made the report’s forecast among the most difficult. But those are the conditions that are also expected to keep interest rates low, said Dana Senagama, CMHC manager of market analysis for Ontario.

She said consumers can expect their monthly mortgage payments to remain stable through the end of 2021, the period covered in the report.

CMHC says the Toronto region market is heading back into more balanced and sellers’ territory thanks to high employment, the influx of immigrants and migration from other provinces.

Although policy changes such as stricter mortgage qualifications and a foreign buyers tax have slowed housing activity in the last couple of years, the resurgence of Toronto’s housing market was inevitable, said Senagama.

“We can play around so much with demand but the supply is so low. Our population continues to increase by 100,000 on average every year. There’s a lot of people moving into this region. They need a place to live. The supply simply cannot keep up,” she said, adding that speaks to the economic prosperity of the region.

Overall, the Toronto forecast aligns with the national picture. CMHC is predicting sales and housing starts will rise across the country with the national average home price reaching up to $569,000 by 2021, from the $488,000 anticipated at the end of 2019.

Toronto housing sales are anticipated to increase to between 83,400 and 92,400 next year, up from between 79,400 and 86,985 this year.

CMHC predicts housing starts will grow to between 31,500 and 36,800 next year with up to 30,500 in multi-family buildings. That is up from between 28,600 and 32,100 starts expected by the end of this year.

Conditions in Toronto mean first-time homebuyers are likely to face stiffer competition for homes in the coming two years.

“We are already seeing demand for the more affordable types of homes like condo apartments and townhouses. That’s an area that has really picked up steam. I don’t think demand ever dissipated in Toronto but it has sort of shifted from the singles to the condos,” Senagama said.

“The sales-to-listings ratio in condos is in what we call the sellers’ territory nearing 70 per cent so there’s a little heat in that market. That’s where properties aren’t staying long in the market. There’s rapid price growth in that area. Conversely in the singles, that’s not happening as much,” she said.

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Condo prices will remain strong because they feed the demand of homebuyers but also investors buying to rent out their unit.

“So you have that competition occurring as well. As long as vacancy rates remain low you’re always going to see higher demand for condos,” Senagama said.

CMHC predicts vacancy rates will remain below 1.5 per cent in the Toronto region in the next two years but the biggest injection of new rentals since 1994 — 3,000 units — means rental conditions will ease up toward the end of 2021.