Prices will cool this year in Toronto’s booming condominium market but concerns over a price bubble forming have been ‘overblown, according to economists at the Royal Bank of Canada (RBC), which claim that demographics and strong investor demand will insulate the market from a crash.

The research department at RBC released a 7-page report predicting that prices in the city’s condo market will cool by between 2% and 7% in the next year but will not collapse.

RBC senior economist Robert Hogue reportedly wrote in a research note that the property market in Canada’s largest city still has a lot of strengths, pointing to a rising population, a shift in the mix of available housing, rising rental demand, and strong interest in buying condos as investments.

Still, recent changes to mortgage insurance rules and looming interest rate increases will reduce the flow of buyers into the market, and there are risks that the type of units bought by investors may not match future demand, Hogue said.

Hogue noted the Toronto area is growing by about 38,000 net new households a year even as legal constraints on urban sprawl prevent growth in new single family homes. As a result, buyers and builders have turned to condos to meet demand.