The once-frenetic condo market has avoided the kind of sharp correction some corners have foreseen since a slowdown began last year, and a new report published Wednesday suggests it will avoid one altogether.
That includes Toronto, where dozens of cranes continue to add floor upon floor to new residential towers despite falling sales. Rising interest rates are likely to tap the brakes further on demand, the report said, but a fire sale on units isn’t on the horizon.
“A flood of foreclosures, and subsequent sharp supply increases, is simply not in the cards,” the report says.
The Conference Board of Canada study does note that “the condominium market, particularly in Toronto, but also in Montreal and Vancouver, has been a source of particular concern.”
But it says “Vancouver’s market is well into a slowdown” already, while the market has remained stable. Meanwhile, markets in Toronto and Montreal are “cooling, but we think they will avoid major downturns,” the report said, “partly because, on the demand side, demographic requirements remain decent.”
Read more: Toronto new condo sales as glut edges up
Also, the banks which provide the money to build new projects still continue to require builders to have healthy pre-sale levels before advancing construction financing, “keeping supply somewhat in check.”
Generally, a builder must have 70 per cent of units pre-sold to buyers and or investors before proceeding with building.
Earlier this year, the Bank of Canada suggested that rising consumer debt levels coupled with potential overbuilding of condo units, particularly in Toronto, posed a risk to the economy and financial health of the country.
On a regional basis, the Conference Board report said prices are expected to see modest declines in several big city markets this year – but surprisingly, not Toronto, where a record glut has formed.
Prices for the Toronto area are expected to remain flat at $305,240. In contrast, Vancouver resale prices are pegged to fall 0.5 per cent to $364,594 while Victoria and Montreal are poised to register comparable dips, the report said.
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