Toronto had 132 highrise buildings under construction in September, well above the next two cities in line, Mexico City and New York, at 88 and 86 respectively, according to research by Emporis.com. The next closest city was Chicago at 17.
The stats caught the attention of Toronto broker John Pasalis for an article he wrote Wednesday on MoveSmartly.com.
“If there’s one thing that concerns me about Toronto’s real estate market, it’s the uncertainty about the boom we are seeing in the pre-construction condo segment,” he wrote. “As Toronto’s pre-construction condo market continues to break sales records, I wonder when this boom is going to run its course.”
Pasalis said in addition to the existing high rise projects, there will be more than 70 new ones launch this fall alone, which more than doubles last fall’s total. He said the boom’s end might be sooner than later, and a new report by Bank of America Merill Lynch Global Research agrees.
“We think investors are underestimating the wall of inventory about to come on the market in the next 12 to 24 months, which could dampen price appreciation and investor returns,” said report authors Ryan Bohren and Sheryl King, both economists.
The Canada Mortgage and Housing Corporation put the rental vacancy in Toronto at 1.6% in April, still one of the lowest in the country. The Toronto Real Estate Board’s mid-October report showed condo sales in the city were up 16%, while average prices were up 10% to reach $369,528.
Pasalis said the gains can’t continue much longer.
“I’m not entirely certain where prices will end up, but what I do know is that we have the one key ingredient that has fuelled virtually every other asset bubble in history: a market driven by a large number of investors/speculators who are buying aggressively because they simply believe prices are going to continue to rise, without questioning their key assumptions. It’s not a great place to be.”
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