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Toronto Condo Bubble About to Burst?

There seems to be a growing segment of the population and the media that feel that the condo market is about to see declining prices. I am getting more and more comments like, “I heard that prices are going to come down this year, so I’m going to wait until that happens then buy”. Based on this, I thought it was time for an update on the ever popular question of “How is the condo market doing?”.

I would like to specifically break down this quote from Benjamin Tal, Deputy Chief Economist for CIBC and resident MSM go-to guy for quotes on the real estate market in Canada. Tal is quoted as saying, “Prices are already softening, housing starts aren’t in the sky, MLS [multiple listing service] activity is starting to soften, so it suggests the market is already starting to level off”.

  1. Prices are already softening. Really? Where exactly is this occurring? All I see are prices going up in the resale and pre-construction segments. There are far more buyers than sellers and average DOM (days on market) is still less than 30. Definite sellers market territory.
  2. Housing starts aren’t in the sky. I’ve never understood why anyone bothers to look at housing starts as an indicator, other than on a year over year macro level. Housing starts go up and down with great volatility every month. Two new condo developments start selling today, one might break ground in 9 months, another in 19 months. One might take 18 months to build, another might be 26 months. Starting and selling and completing are three very different things. If someone can enlighten me on this metric I’d be much obliged.
  3. MLS activity is starting to soften. I’m looking for a resale buyer who thinks this is true. Please contact me immediately if you feel that you have more than enough choices of quality, well priced listings fitting your search criteria! All I see when I’m on the ground every day with buyers is a shortage of listings and anything that hits the market with any sort of quality will sell over asking in multiple offers.

I would love to take Tal along with me as I search for properties (both condos and freeholds, pre-construction and resale, investors and end-users) for my buyer clients. I’m quite sure that after a day or two his opinion on the Toronto real estate market would change dramatically.

Please don’t get me wrong though-a slow down in our market would probably be a good thing after the run we’ve been on since March 2008. It would breathe some much needed life into the entire industry, however, I just don’t see it happening any time soon unless there is some dramatic shift in the market. I still stand by my comments I made in July 2011 on the market. Unless there is a rapid change in interest rates and/or a major economic catastrophe, the Toronto real estate market and the condo market in particular will continue on its current path which is presently appreciating at about 8% per year.

Those are my thoughts. What about you? Contact me or leave a comment.

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11 Responses to “Toronto Condo Bubble About to Burst?”

  1. Robert

    Much as I think that 2012 should be the year it happens…I agree with you that the signs aren’t there yet in the mid to low end market. Australia market has collapsed, and they were the other hold out on dropping prices. We should see it by this time next year when our interest rates should have started their ascent

  2. Well written.. I think a lot of this fear mongering is just media hype.. Writers need something scary to write about and condos are an easy target. I think a little “softening” of the market would be a good thing anyway..

  3. Totally agree, Andrew…as long as interest rates remain low, the economy remains decent, and immigration numbers stay strong into the GTA, the market should continue…the resale market definitely remains on fire – a good friend of mine was involved with multiple offers on Dec 22, in the wilds of Mississauga…unreal..

  4. Maxwell

    What comes first the chicken or the egg… similarily is what comes first… recession or lower real estate prices???–many-canadians-believe-we-re-already-in-recession-survey?bn=1

  5. Adam

    Downtown prices are not dropping anytime soon. Listen to Andrew. The supply is to tight right now.

    @ Robert. Interest rates will remain low. With what’s going on in Europe right now and in the U.S. this isn’t a time to be raising rates.

  6. Great article. It’s always at this time of the year that you hear such claims from people and the media. Just a few days ago 5 years fixed interest rates hit a historical low (2.99%). This can only mean one thing for Toronto condo prices.

    I hear the similar bubble-burst claims being made for Mississauga Condos. As a Realtor in Mississauga, focusing on Square One condos, I am having trouble finding decent properties which are reasonably priced and that don`t not disappear from MLS within 3-4 days. By the time my buyers give me the `go-ahead` on a condo – its already sold.

  7. David Gills

    This whole argument that low rates equals higher condo prices has got to stop. You do realize that central bankers keep rates this low because they are trying to support what they view as a slowing or very vulnerable economy. A 1% bank of Canada rate is not something that should inspire confidence in condo buyers.

  8. Andrew la Fleur

    Do you see rates going up anytime in the next 12 months?

  9. Advice for home buyer- buy a detached home with land rather than a condo or townhouse. Just take a look at what happened in Vancouver.

  10. Mark

    Only real estate agents and mortgage brokers claim it won’t collapse.

    China is faltering. 50% of buyers are in HK buying these to rent them out.

    They will be forced to sell in order to pay off their debts.

    That’s going to be just one of the straws that break the camel’s back clear in half.

    Condos are double the prices they should be.

  11. In my opinion, the prices are going to hike as the condo vacancies are on the low. In my line of work (as a real estate agent), I have keen insight on this topic.

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