News   May 28, 2024
 1.3K     1 
News   May 28, 2024
 1.7K     0 
News   May 28, 2024
 574     0 

Baby, we got a bubble!?

Record levels of home building in Canada raises new red flags


An international construction industry organization is raising new red flags about record levels of home construction in Canada's major cities.

More than a quarter of Canadian construction industry professionals told a new survey by London-based Royal Institute of Chartered Surveyors they were worried that Toronto's housing market was at risk of a price correction because of high levels of new home construction. Half also pointed to Calgary as a market where the level of residential construction threatened to outstrip demand amid falling oil prices, putting home prices at risk.

The study comes on the heels of a report by New York-based Fitch Ratings that warned of "unprecedented" overbuilding in Toronto's condo market. The city has more than 80,000 condo units in development, a number that has grown by 50 per cent in just four years, Fitch said.

Canada Mortgage and Housing Corporation has also raised concerns earlier this year about condo markets in Toronto and Montreal, where it said levels of new construction have reached record highs.

http://www.theglobeandmail.com/repo...dian-cities-raises-red-flags/article25634742/
 
Thanks for copy/pasting only the 1st half of the article

Here is the 2nd half of the article...

"Despite growing fears of a record boom in condo construction, few expect the city’s condo market to crash. Many of the units now under construction in Toronto reflect a surge in housing starts that dates back to 2012. The vast majority – 84 per cent – of units under development have already been sold, research firm Urbanation said in an analysis earlier this summer.
After a jump in the new condo inventory last year, the number of new units hitting the market actually fell 22 per cent in the first quarter of the year, Urbanation said, while the number of unsold units still under development dropped 10 per cent compared to a year earlier.
The falling supply of new units has helped support the resale condo market. Sales of existing condos jumped 16 per cent in the second quarter of the year compared to the same period last year, the Toronto Real Estate Board reported. Resale prices rose more than 6 per cent and now average $416,728 in the city.
“Much of the new condominium apartment inventory that has been brought to bear on the market in the recent past has been absorbed,” said board president Mark McLean. “In fact, market conditions have tightened with months of inventory trending lower.”

http://www.theglobeandmail.com/repo...dian-cities-raises-red-flags/article25634742/
 
Thanks for copy/pasting only the 1st half of the article

Here is the 2nd half of the article...

"Despite growing fears of a record boom in condo construction, few expect the city’s condo market to crash. Many of the units now under construction in Toronto reflect a surge in housing starts that dates back to 2012. The vast majority – 84 per cent – of units under development have already been sold, research firm Urbanation said in an analysis earlier this summer.
After a jump in the new condo inventory last year, the number of new units hitting the market actually fell 22 per cent in the first quarter of the year, Urbanation said, while the number of unsold units still under development dropped 10 per cent compared to a year earlier.
The falling supply of new units has helped support the resale condo market. Sales of existing condos jumped 16 per cent in the second quarter of the year compared to the same period last year, the Toronto Real Estate Board reported. Resale prices rose more than 6 per cent and now average $416,728 in the city.
“Much of the new condominium apartment inventory that has been brought to bear on the market in the recent past has been absorbed,” said board president Mark McLean. “In fact, market conditions have tightened with months of inventory trending lower.”

http://www.theglobeandmail.com/repo...dian-cities-raises-red-flags/article25634742/

Not allowed to post complete articles but I'm glad you added this.

Since most condos are being sold to investors, it's meaningless how many have been sold. Ultimately there needs to be end-users as either buyers or renters. Once these condos come online, we will find out quickly if supply has overshot demand. In that case, investors will have to either sell or rent at a loss, both of which are unappealing and will create a downward price spiral.
 
Economy is so crap. Smart money left commodities like gold and coal in 2011. Retail sales slump since 2014 - so many stores going bankrupt or shrinking footprint. Oil crash in 2015 - OPEC continues to pump to wipe out smaller oil companies with low oil prices. The loonie sinks to 77 cents in 2015 - lowest in a decade. Let me know what else I missed and what the next asset to crash. I am thinking bank earnings are next.
 
A housing bubble emerges when housing prices increase more rapidly than inflation, household incomes, and economic growth.
 
There are news reports in today's papers that CMHC has proposed changes to its insurance criteria. Now, CMHC will consider rental income from a unit, as part of total income, to approve mortgage insurance. Only factor that has not yet been determined is as to whether this criteria will apply to only those houses in municipalities where it is legal to rent out part of a house -- mainly basement -- or also to the houses that are 'illegally' rented. This will increase prices of the houses where a part of the house could be rented. Presumably, this will apply to townhouses also. And, theoretically, some day it could apply to condos as well, for example, where a single individual buys a 2 bedroom unit and rents the other room.

All that points out to continuing increase in prices -- both houses and condos -- with bubble becoming bigger and bigger and not even a hint of a 'burst' in the foreseeable future. A great incentive for individuals now sitting on the fence to jump in the market with both feet.:)
 
image.jpg


Yet the American economy is far better than ours. Interesting.
 
We might have a national recession, but I don't think Toronto is in one.

toronto is definitely not in one...everyone i know is getting richer and richer. even the middle class people don't really need to work much.

i don't see the housing boom ending. they'll keep building condos and big money (national pension funds ect.) will keep buying them because toronto has fresh water and farmland galore. everyone knows that if you buy and hold property in toronto you're making money long-term.
 
One of my concerns is the euphoria around Toronto real estate. As strong as it has been and as much support as it seems to be sustaining in the short term, it'd be prudent to tread carefully when things get a little too bullish.

This is not to say I'm expecting a market crash. Pullbacks are most certainly expected and not to mention healthy for the markets but there's a natural underlying build-up of concern when all-time highs keep getting recorded, over and over again. I definitely won't be getting out of the real estate market but I'm also not inclined to put all my eggs into this one basket.
 
There used to be a time, when at the hint of a slight increase in condo prices, especially in downtown Toronto, this thread used to lit up with comments that the 'Bubble' has now become even bigger and it is going to be a spectacular blowout in the near future. Now whenever there is a news of further increase in condo prices, there is not even a 'Yawn'.

In a news item about Vancouver real estate in today's The Globe and Mail, there is a mention that Vancouver has now become an 'International' city on par with London. Residents have lower their sights of owning a house and have accepted the reality condo living now is the norm for most of them. Can Toronto be far behind in that respect? That means more and more individuals will be chasing condos resulting in ever increasing prices.

If that's not enough, there is a reference in news today to an article in Metropolis magazine on New York that Toronto is most liveable city in the world. Guess, what it is going to do condo prices in Toronto, especially downtown Toronto.

For those of you, who were cautious and stayed on the sidelines, there were be another opportunity some day, whenever that day is, to get on the bandwagon. And for those of you, who already have their hand in the 'cookie jar', I would say: Yaba Daba Doo.
http://www.blogto.com/city/2015/08/toronto_ranked_most_liveable_city_in_the_world/
 

Back
Top