The Toronto-area 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 per cent compared with 2009, while existing home sales should be up 2.5 per cent, 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 per cent 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.

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