Things are looking up for Toronto’s condo market

Why all this talk of a crash is exaggerated


090505_condoThe multitude of construction cranes that now dot Toronto’s skyline seem to point upwards as if oblivious to the harsh economic times unfolding below. Floors keep getting stacked onto condo project after condo project, adding to the number of new units that are unsold, and will likely remain that way for many months. It’s a trend that has led many in this city to look up and wonder not just who’s going to buy all these new condos, but whether a crash in the once-heated condo market is now all but inevitable.

A report this week from TD Economics says “no.” The inventories of new condos, while significant, are not as bad as one might think, nor is the impact the recession is having on the economy of the Toronto area. The market is certainly caught up in the downturn, but the kind of underlying circumstances that have caused all-out meltdowns in U.S. cities do not exists here, it says. Toronto’s condo market is in the midst of a “cyclical downturn rather than a drawn out structural downturn,” it states.

There are, in fact, some rather encouraging signs in the condo market, says the report’s author, TD economist Pascal Gauthier. In the first quarter of this year, sales appeared to be firming up and while they will likely remain quite low this year compared to levels seen during the recent boom years, the numbers are “pretty decent . . . given how strong the economic headwinds are,” he says. The fact that the Bank of Canada has brought mortgage rates to the lowest level possible will also help soften the cycle, he
adds. Then there are the overall economic conditions in Toronto. While job loses have been heavy across Ontario, Toronto has been relatively unscathed. Employment in Hogtown is down less than one per cent, compared to a six per cent drop during the recession in the ’90s. It all bodes well for the city’s condo market.

While there might appear to be a glut of new units on the market, the levels are not yet overly worrisome, says Gauthier. In the mid 1980s builders kept adding new condo units for three years, seemingly out of touch to changing market conditions. The number of condos built between 1987 and 1989 was the equivalent, in today’s terms (taking into account population and household growth), to 81,000 units. That’s compared to about 35,000 between 2007 and 2008, notes the report. “It became more than a cyclical problem, it became a structural problem,” says Gauthier. That does not appear to be happening this time around. Builders, he notes, have been scaling back.

But there are still risks ahead, especially if that trend of slowing starts doesn’t stick, and builders pump out condo units faster than the market can handle in coming months. At that point, says Gauthier, it will be “time to raise the red flag.”


Things are looking up for Toronto’s condo market

  1. These are all projects that were committed to before the exciment hit the air conditioning unit. If anyone thinks these rediculous overpriced concrete boxes in the sky are a great “investment”, you had better check you meds. This is just more desperate rethoric from desperate real estate flim flam artists, trying to suck the last dollar out of a disappearing middle class. Let’s see, world financial market collapes taking millions of jobs with it, the car industry in full retreat, the Hamilton steel works shut down(likely for good, but no one’s admitting yet). Who the hell is supposed to by this stuff, the guy hawking newspapers?(no forget that, all the newspapers are going out of business). Oh, I know, the guy with the wal mart greeters jacket, he’s got lot’s of money to buy the overpriced fantasy boxes(and I just bet the banks are chomping at the bit to give him a six figure morgage. No wait, that was the subprime fiasco. Don’t think any bank will go there again any time soon. I remember the “experts” saying real estate could go no where but up and that the stock market was going on a 50 year run. Now the snake oil salesmen are saying “well everything not so bad”…..for them. People better wake up fast and save some money for a change. We are in for some terrible times. If you don’t believe that, I assume you think all those millions of decent paying jobs that were shipped off to third world hell holes are magically going to return. Fools!

    • You have to be blind or just out touch to NOT see that condos are worth more than houses and increase in price.

      Condo’s in North York are going up by 5% a year. thats an avg of $80,000. I bought one for 240000 and sold it for 320000 the next year. Downtown is in the same upward rise.

      people with actual money from overseas are owning 50-60% of these units. I know young professionsal with 8 properties(condo/houses). All rented and earning equity.

      I dont know one person who has bought a condo and it tirned into a bad investment. people with no cash are the ones that moan and groan.

      Real Estate is the only inestment worth making. Name one investment that return 50000+ a year?

  2. Gotta love the rosy glasses the construction and mortgage industries tries to sell us.

  3. I've been waiting and waiting for the right moment to buy again. I am thinking that this is an excellent time to consider buying depressed properties. Many people are under water and there are deals out there for the prudent shopper. Based on the comments above/below I think much of the negativity is now priced into the market.

    The trump tower opening in 2010/2011 will raise property values in the downtown core and relative to many other cities real estate in Toronto is generally under valued. The big wild card will be the Government of Canada and whether or not they will encourage capital formation, or destroy it through taxation.

    • Go for it bud. It is always a good time to buy. Especially condo’s. Toronto is gonna be full of high risses and poeple cmmuting from the city to the GTA to work. Its a changing trend.