There’s been a ton of worry about the condo market in Toronto. Too many units are on the market, too few buyers are available for them, and yet starts continue on. Just a quick look at the simple chart below shows that if we continue at this pace, we could certainly be headed for some troubled waters.
But is that really true? Are there so few supporting factors for this condo market that it’s simply too late to do anything about it, and we’re headed for doom? According to the Conference Board of Canada, we’re not. Headed for doom, that is. As for the factors that will continue to support the condo market? It turns out there are a few of them. And while Toronto’s condo market might be headed for a much-needed correction, there’s little chance that it’s going to collapse completely.
“The market is poised for a slowdown,” says Robin Wiebe, senior economist of the Conference Board. “But it’s going to be gradual, not disorderly.”
One of the factors that’s going to play into keeping the condo market afloat is that single-family homes in Toronto are simply too expensive, with the average price topping out at $508,000 in July. When condo units can be purchased in the city for nearly $200,000 less, it’s clear that detached homes are things reserved for the wealthy in the GTA.
Immigrants are not usually part of that wealthy group; and this market segment is also going to help support the condo market. According to Mr. Wiebe, over 100,000 people immigrate to Toronto every year, from other provinces and other countries.
But that’s not the only group that’s going to support the condo market in the Toronto – the Baby Boomers will, too. The first Boomers are just now starting to head into their mid to late 60s, and they’re starting to look at selling their huge family homes and move into something that’s easier for them to maintain and get around in. This group is also going to start scooping up those condo units.
Mr. Wiebe also says that even if interest rates rise, it’s going to be very slowly; and these low rates will also help support condo sales.
“Developers and bankers are looking at the same numbers we are and they can see all these condos under construction,” says Mr. Wiebe. “I think they’re probably saying, ‘Maybe it’s time to just slow the pace (of new projects) a little bit for a while.”
As it turns out, says Mr. Wiebe, the Toronto condo market is not the one to be most concerned about. The area of most concern is still Vancouver, where foreign investors are starting to back off and prices are predicted to fall by about 6 per cent.