Toronto “is starting to stand out as the hottest real estate market right now,” following the release of December sales figures, BMO Nesbitt Burns economist Robert Kavcic says.

The Toronto Real Estate Board said Thursday that Greater Toronto real estate agents reported 4,718 sales in December, up 10.1 per cent from the same period in 2010. The average selling price was $451,436, up 4 per cent year over year.

That capped off the second-best year on record under the board’s current boundaries, dating to 1994. “Low borrowing costs kept buyers confident in their ability to comfortably cover their mortgage payments along with other major housing costs,” board president Richard Silver said in a release. The board said buyers were held back by a shortage of listings, while tight market conditions kept upward pressure on selling prices.

It’s a different story in Vancouver, where the number of residential sales in December tumbled by 12.7 per cent over the same period a year earlier, according to figures released this week by the Real Estate Board of Greater Vancouver. Sales for 2011 were 5.9 per cent above 2010 levels but 9.2 per cent below 2009. The overall residential benchmark price, as measured by the MLSLink Housing Price Index, has also dropped by 1.5 per cent since June.

Earlier this week, TD senior economist Jacques Marcil predicted both B.C. and Ontario could face challenging housing markets over the next two years as appreciation rates start to flatten.

Mr. Kavcic said the ratio of sales to new listings in Toronto and throughout Ontario “is pretty much in line with historical norms,” but noted that the number of starts for new multiple-unit dwellings (largely condos) in Ontario over the past 12 months had outpaced single family homes by a factor of 1.5 to 1, up from a ratio of close to 1 to 1 over the past decade and “pretty well the largest discrepancy we’ve seen in a long time.”

As a result, “to the extent where there if any downward pressure on prices is applied, the condo market is slightly more at risk” in Toronto, he said.

Merrill Lynch warned last month that housing prices could correct by as much as 10 per cent in the next two years in Canada because of weakness in the economy, expressing particular concern about Toronto’s condo market. The Bank of Canada also warned the Toronto market looks overbuilt and could see prices drop.

But something to keep in mind is that every January at around this time, economists have repeatedly made similar predictions (albeit much more severe in the past) and have been proven wrong over and over again. We're confident that in time, they will be proven to be wrong yet again.

Source: www.theglobeandmail.com