Anyone living in Toronto has noticed the never ending bouts of construction littering our streets.
While construction can make getting around the city quite frustrating, it’s a sign of a booming housing industry and a healthy economy.
But is too much of a good thing a bad thing in this case?
Experts are having a very hard time answering that question. Will the condo market crash and parallel the same sufferance the U.S. experienced years ago? With condo sales up 33% from last year and 7,588 new condo units in the year so far (1), the answer points towards a big fat ‘no’.
Let’s not forget that the condos are going to finish construction at different times – they’re not all set to finish on the same day of the same month. This helps balance out the amount of units available for each wave of new buyers. And with the rate of population growth and low interest rates, there will be no shortage of buyers even with the average condo unit price climbing to $682 per square foot.(2)
If the signs of a healthy condo market are so obvious, why are experts so worried?
The Financial System Review done by the Bank of Canada marks our condo market as a ‘pocket of vulnerability’ and identifies the housing market as one of the biggest risks to our economy (3). Because, on the other side of all of this demand, there’s still the fact that unsold units are set to climb by 30% (4) due to an ever existing gap between growing supply and demand.
Not to mention that the sales for new units have remained flat despite strong sales in early 2014 (5). The Globe and Mail also reports that local investors aren’t touching the housing market because of the risk that comes with the potential of rising interest rates – the risk/reward ratio isn’t ‘very attractive’ (6).
Evidently, there are convincing views on both sides of the condo bubble.
Some analysts praise the robustness of our condo market and exclaim that it’s a result of our growing population and consumers’ inclination to live in trendy condos. Others fear the rising prices, rate of inflation and flat sales reduce the sustainability of the industry. Though they cannot agree on the future of our housing market, what experts can agree on is that Toronto is quickly becoming the condo-capital of our country and it doesn’t look like it’s slowing down anytime soon.
Picture from: The Star