Friday, 04 November 2011 14:46
Toronto condo market to moderate in 2012: CMHC Featured
Written by Shane Buckingham
Excess supply in the Toronto condominium market will likely push prices down next year, making preconstruction condo speculation more of a gamble, according to the Canada Mortgage and Housing Corporation’s leading economist in the Greater Toronto Area (GTA).
“More units are going to be listed for sale and that’s going to inevitably slow down price appreciation, particularly in the condominium market,” Shaun Hildebrand, a senior market analyst at CMHC, told a crowd of real estate professionals at the CMHC’s 2011 Housing Outlook Conference in Toronto on Thursday. “So those looking to bank on a 20% or 30% return in a few years probably should be doing their due diligence and not be buying.”
The number of projected GTA condo sales in 2011, which is at 25,000, also “seems worrisome,” Hildebrand said
Add to that the glut of new units coming onto the market in 2011 and 2012 (about 18,000 each year) and it’s only a matter of time before the market begins to adjust, he told the gathering, at the Metro Convention Centre.
“It’s not really a question of whether or not the level of development is going to slow; it’s how it’s going to happen,” he said. “If it happens into next year, if we start to see some moderation, the transition will be pretty smooth. If not, if buyers and investors continue along their current ways, then the transition a few years from now is obviously going to be a lot more abrupt.”
While Hildebrand warned of a near-term correction, he stressed that any adjustment in condo values in the GTA would be moderate, adding that he does not foresee a condo market crash similar to the one Toronto experienced in the early 1990s.
There were many more investors in the market two decades ago, he said. While CMHC does not have figures pinpointing the number of investor-owned condos, Hildebrand pegs that figure at roughly 25% of the GTA’s condominiums.
Given the prices of condos in many parts of the GTA, with the October average at $341,571 -- or 9% above the year-ago period -- more Torontonians will look to rent, he said. And that’s good news for buy-and-hold investors.
Hildebrand said in downtown Toronto investors could still find condos for $380 a square foot, costing $1,400 to maintain. Those units rent for about $1,500, generating $100 a month in cash flow.
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3 comments
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Wednesday, 09 November 2011 13:34
posted by
Laurin Jeffrey
As long as there is positive - or close to positive - cash flow in renting out condos, then there will be investors. Make a bit of money every month while someone pays down your mortgage and you reap price appreciation.
Rental vacancy rates are around 1.6% right now in Toronto, so there is still a ton of demand for rental condos.
And when first time buyers cannot afford houses, they have only one place to turn - buying a condo.
This is what is keeping - and will keep - the condo market afloat.
P.S. The economic conditions are no worse than they have been for the past 2 years. We are in a middle ground, not really rising but not declining. But we should have no national debt by 2014-2015 and our Bank of Canada head has been trusted to run a major world bank arm. We are doing just fine around the GTA - look at housing sales, watch all the big screen TVs heading out of Best Buy. -
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Tuesday, 08 November 2011 13:05
posted by
Canadian Mortgages Inc
Toronto Condo market is due for a leveling off - even a decline - after enjoying such a robust growth.
With the over all economic forecast being weak at best, look for the selling prices to drop some, but dont look for a sharp drop off of prices for existing units. The real drop could be in the construction side of the market. -
Comment Link
Sunday, 06 November 2011 01:28
posted by
Paul Viau
The condo market in Toronto should cool down next year.
If the real estate market/economy slows at all it is due for a slowdown based on the numbers on the market.
Halifax on the other hand will see the prices driven up due to local demand from the newly announced Irving Shipyards contract. And the fact that new construction is at a new low in the City.
See our blog at http://condosnovascotia.ca
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