Currently, it is not. But by the end of 2010, it will certainly be way oversupplied. There have only been 3000 condo completions in the last 19 months in the Toronto Core, but over the next 17 months there will be 15 000! That is a 1000% increase....and it could get worse. If 30% of those condos are investor owned (a very conservative estimate) that's a lot of rental units, plus, many people moving into these condos are already renting condos - sometimes a couple - each renting a separate condo and then moving in together into another, thus opening up 2 condo's for the one built form.
Also, rents are currently 35% below where they should be to generate a decent (8%) return from an investment perspective. This leads me to believe that prices are overinflated.
I've put my money where my mouth is and sold my condo in May in order to lock in the equity. It's true that if I'd waited until now, I probably could have made another $10 000, but I was looking at a time horizon of needing the cash for another condo that will be completed by Nov 2010. At this point I expect there to be a correction in full swing. Especially amongst smaller units.
A couple other things to think about, and I apologize if anyone has read another post of mine that mentioned this. Until about 3 years ago, when you purchased a condo, you paid the market price for that unit as if you were buying it right then. You buy in August of 2006, you pay August 2006 market price - even if it won't be ready until 2011. You, not the builder, take the RE risk and hope that when it's finished you see an appreciation. The possibility for an upside is definitely there. Now, when you buy pre-construction, you are being asked to pay not what the unit is worth now, but a theoretical price that it will be worth when completed. The builders have removed any incentive for RE risk and taken all the presumptive appreciation for themselves. Costs for building are lower now than they were in 2006, but developers are charging 2x the price for the same stuff. New condo sales are still down 40% and while we hear of a recent surge, the fact is, very few properties have been launched over the past 12 months so the surge is happening in a much smaller market which might make it sound bigger.
I've totally flipped sides and while for the past 6 years I was big big big on condos and argued as much using the whole demographic change, the shift from actually wanting house to desiring a condo, immigation, etc. I think these new realities are not enough to counter the low interest rates/skyrocketing availability/high debt load problem, and we're in for a rude awakening that's going to start in about April.
