Tag Archives: condo supply
Michael Babad – Globe and Mail
There was much talk this week about condos and bubbles, notably in Toronto, but elsewhere as well.
As The Globe and Mail’s Bertrand Marotte, Jacqueline Nelson and Richard Blackwell reported, the construction industry continued to make gains in April as housing starts climbed to an annual pace of 244,900. Driving the increase, Canada Mortgage and Housing Corp. reported, was construction of multiple units, such as condominiums.
In Quebec and Ontario, starts surged 56.5% and 12.2%, respectively, largely because of those multiple units.
Looking at those numbers, economist Robert Kavcic declared that condo construction has now reached the “boiling point,” and that the housing market threatens to overheat in some segments and some regions.
“The bubble-mongering that has been going on seemed overplayed for some time, given that housing starts were running only slightly above household formation (about 180,000), on average, for the past three years,” Mr. Kavcic said.
“But that is no longer true with starts now moving well above underlying demand, and accelerating in recent months,” he warned in a report about the CMHC numbers.
Comment: But that is only in certain areas. In Toronto, we are seeing around 50,000 households forming every year – with 28,000 condos being completed. There is still a huge gap between new housing being created and demand. That is why we have so many condos going up, the demand is there.
“It’s important to note that the heated building activity is very much contained to the multi-unit segment in a handful of cities. While single-unit starts edged up just 0.6% in April, multis surged 27.4% to the second highest level since 1978 – the trend away from building detached homes in favour of condos continues unabated, particularly in Toronto, Vancouver and Montreal.”
Comment: Comparing condo building today to 1978 is just dumb. Everything has changed. People want to live downtown, they want to be near work and play. People are less interested in sprawl and living in the suburbs. People are buying when they are single, not when they have kids and need a yard. I bet detached home construction in 1978 was far higher than today – does that mean the single home market is collapsing? No, it just further supports the fact that housing trends have changed dramatically in the past 34 years.
David Rosenberg, the chief economist at Gluskin Sheff + Associates, agreed that construction is “far outpacing” natural demographic demand.
“No doubt the Canadian economic backdrop is solid overall and mortgage rates are at low levels,” he said. “But at some point, the Bank of Canada will no longer be playing the role as the boy who called wolf, and mortgage guidelines are already being tightened up.”
Comment: Huh? What the heck does that have to do with new condos?
Some economists do see just softer times ahead for the overall market, however.
“Given that April’s surge was driven largely by the multi-unit segment, we suspect that this level of home starts is not sustainable,” said Dina Cover of Toronto-Dominion Bank.
Comment: Why is it not sustainable? People buy them and live in them, they can afford them, they want them. We have had close to the same levels on home starts for 7 or 8 years now. It is not new, it has been sustained for quite some time now.
“Moreover, unseasonably warm weather in many parts of the country surely brought some new home starts forward. As such, we expect to see some give-back in the coming months.”
Comment: Like when Feb numbers where down and everyone panicked? Construction is different this year because of the weird weather. That is a strange variable that is not easily accounted for.
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Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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