Toronto Condo Market Forecast
The demand for condos in the Toronto metropolitan area has been increasing over the past few years. Steady employment growth, in-migration and very low mortgage rates coupled with rising average prices for ground-oriented homes has driven this demand.
The result has been increased condo starts in 2005 & 2006. The number of foundations laid for this housing type will continue to grow through the end of 2007. Growth in condo starts will translate into heightened levels of completions and registrations over the next two to three years. Expect the year-over-year increase in the condominium universe in 2006 and 2007 to be greater than experienced in previous years.
While mortgage rates are forecast to decrease over the next year, the cost of borrowing will remain very low. Demand for affordable ownership housing will remain strong. The vacancy rate for condos will remain above the average experienced during the 1990s, but much lower than in the primary rental market.
Soft rental market conditions and competition from alternative asset classes will continue to weigh on the confidence of existing and potential condo investors. The share of investor ownership will remain in step with the lower levels experienced over the past three years. Investor penetration will continue to be most prominent in newer developments, which will prove easier to rent due to a higher level of finishings and amenities.
In conclusion, recent trends affecting the Toronto condo market have kept the level of investor speculation low. This is in contrast to the high level of investor penetration 15 years ago in the Toronto area, which played a role in the bursting of the residential real estate bubble in the early 1990s.
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