Growing by Michael Gil
Toronto’s housing market is certainly one of the most dynamically evolving real estate markets in Canada. Developers are constructing new buildings at a record pace and at this very moment, there are more condos being built in Toronto than anywhere else in North America. In the first quarter of 2012, the number of new listings of condominium apartments was up by 14 per cent in a year-to-year comparison and the average selling price was $334,952, a 3.7 per cent rise compared to last year. The question asked by many is clear: isn’t the construction boom on its way to exceeding the absorption rate in the city and eventually causing huge problems with the real estate market?
The discussion about an eventual bubble got heated after the release of Scotia Capital report. Analysts argue that according to CMHC estimates, roughly 25 per cent of condos in the Greater Toronto area remain vacant despite being sold. Such data points to the ghost city phenomenon, denoting a situation in which speculators buy apartments at high prices but find themselves unable to sell them with profit until the bubble bursts. Furthermore, Urbanation noted that the amount of unsold condo units at the end of 2011 rose by 27 per cent compared to last year. Ms. Cover, an expert at Toronto Dominion Bank, added her comment to the discussion: “It definitely is a very overheated market. Right now, developers are continuing to build, so there must be some demand there. But overall, if starts keep going like this and demand slumps, then we will have a bigger problem.”
Condo by Marc Falardeau
On the other hand, many voices doubt that the Toronto market is facing potential problems. First of all, CMHC spoke up to clarify the data that had been used for the Scotia Capital report, saying that 25 per cent of allegedly unoccupied condos are just “investor owned.” That might mean that they are rented or owned by the investors, but the data doesn’t say anything about vacancy. In addition to that, analysts point out that the construction craze also occurs, as investors want to make sure they manage to use the precious time of low interest rates before their expected rise in September. Figures also show that out of about 17,000 condo units completed in Toronto last year, less than 5 per cent remains unsold. Such results hint at unbelievable dynamics and strength of real estate market in Toronto — maybe the bubble talk is just a slightly unnecessary worrying over stats that actually look great right now.