Tara Perkins – The Globe and Mail

A new report from the Conference Board of Canada predicts that the much-watched condo sector will avoid an ugly downturn, even in Toronto.

Comment: Hooray, finally someone else agrees with us realtors! Everyone in the real estate industry, from agents to companies such as Royal LePage through to analysis companies like Urbanation or RealNet – they already knew this and had been saying this. But the public just said we were biased, we had a vested interest in higher prices. If we can finally get the economists to admit they were wrong about corrections and start agreeing that we are looking at increases for the future, then maybe we can all start agreeing on the truth.

Economists and policy-makers are keeping a close eye on condos, especially in the country’s most populous city, where cranes dot the sky. A number of economists say that too many units are being built, a development that would put pressure on prices. The Bank of Canada has highlighted the risks that this market could pose to the economy.

Condo sales plunged in most Canadian cities last year, and are expected to be down again this year.

Comment: ALL real estate sectors saw sales fall in the 2nd half of 2012 (and the 1st half of 2013) due to tighter mortgage rules. But condo developers did pull back in 2013 and launch fewer projects. Fewer projects means fewer condos for sale – which led to fewer sales. It is not like units being offered rose while sales fell. Context is always needed!

But Wednesday’s report, which was done for mortgage insurer Genworth Canada, argues that the market will not sink too low, and will be propped up in part by population growth and modest employment gains.

Comment: Actually, the report says that the market will NOT sink at all.

While the report does say that higher mortgage rates could cool things off later this year or early next year, it adds that “a flood of foreclosures, and subsequent sharp supply increases, is simply not in the cards.”

Comment: There, does that satisfy the doomsayers yet?

Homeowners are taking advantage of low interest rates to pay down their mortgages, offering a cushion when it comes time for them to renew, it says.

“Markets in Toronto and Montreal are cooling, but we think they will avoid major downturns, partly because, on the demand side, demographic requirements remain decent,” the report says. “Also, the banks will continue to require builders to have healthy pre-sale levels before advancing construction financing, keeping supply somewhat in check.”

Comment: No, Toronto is not cooling. Quite the opposite! After slower sales from July 2012 to June 2013, July of this year saw sales shoot up 16%, with August looking to go even higher. Prices are rising as well, have for 57 straight months now. How is that cooling in any way?

Vancouver’s condo market, it notes, is already well into a slowdown.

“While regional markets clearly vary in strength, all will benefit from an expanding population and a rising share of condominium-loving empty-nesters aged 55 or more,” the report adds.

It also says that “weak pricing will help affordability.” It predicts that principal and interest payments will drop in at least five major cities this year, led by a 2.5% decline in Victoria.

While payments are expected to rise in Alberta, the report says that Calgary and Edmonton are still the most affordable condo markets when local incomes are taken into account, with mortgage payments taking only about 9% of household income. “By contrast, we expect payments to eat up roughly 20% of Vancouver incomes,” it says.

The report forecasts a 0.5% drop in Vancouver resale condo prices this year, to $364,593. Victoria and Montreal are also expected to record price declines, with Montreal’s average resale price dropping 0.7% to $265,344. Toronto is forecast to see its average price remain flat this year, at $305,239.

The report predicts that all cities will see some price growth, ranging from 1.4 to 3.6%, in 2014.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.
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