Despite dire predictions of an all-out crash, a newly released report forecasts the Canadian condo market will remain stable across eight of the country’s major cities – Toronto included.
“We’re certainly calling for some softness in the (Toronto) condo market but the latest release from the Toronto Real Estate Board is not too bad when it comes to the (housing) market and the condo market specifically,” says Robin Wiebe, report co-author and senior economist at the Conference Board of Canada.
While the high number of completed and unsold units coming on stream – more than 1,000 each month in April, May and June – may indicate oversupply of condos in the market, it doesn’t tell the whole story. Wiebe says the absorption rate of new condos is healthy. In fact, a record high number of absorptions – more than 3,000 – occurred in April.
“The ratio of unabsorbed units to the recent take-up has fallen,” he says.
Indeed, the Conference Board foresees “a large gain” in the absorption rate over last year. Though inventory levels will remain high in Toronto, it forecasts absorption of 22,505 new condo units in 2013, an increase of 82.4 per cent.
In the resale market, condominium sales are projected to number less than 20,000 units, down 7.9 per cent from last year. The report attributes this to a hangover of sorts from declining sales in the second half of 2012.
With sales down, development is likely to slow down too. The report forecasts building starts to drop by more than 25 per cent in 2013.
However, a decline in the inventory of condos, coupled with employment gains and population growth, is expected to encourage buyers and builders to become more active again in the condominium market in 2015, according to the report.
Beginning next year, demand in Toronto’s resale market is expected to recover with stronger economic growth. From 2015 to 2017, anticipated average growth in sales is pegged at 2.5 per cent per year. Based on a sales to active listings ratio hovering at approximately 30 per cent, median prices are predicted to edge up by an average 1.8 per cent per year from 2014 to 2017.
The report paints a similar picture in Canada’s other major cities. Calgary and Vancouver are projected to see strengthening sales and prices in 2014. Calgary starts affected by flooding this year are expected to pick up next year, while Vancouver’s condo market is proving to be resilient, as it continues to provide an affordable alternative to Canada’s most expensive housing market. Montreal and Ottawa should see increases in sales from 2015 to 2017, thanks to economic growth. In Montreal, an aging population will also contribute to unit sales.
“Whether it’s first-time homebuyers entering home ownership, empty-nesters looking to downsize or professionals seeking a shorter commute, condos appear to remain a popular option for urban Canadians,” says Brian Hurley, chairman and CEO of mortgage insurer, Genworth Canada, which commissioned the report.
Michelle Ervin is the editor of CondoBusiness.
