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ROMA LUCIW
Globe and Mail Update
May 17, 2007 at 4:33 PM EDT
Soaring prices for detached homes have sent buyers flocking to condominiums in recent years, but a new report from Toronto-Dominion Bank says the greying of the Baby Boom generation, newcomers to Canada, and continued urbanization will bolster demand over the long term.
Canada's housing market has been on fire in the last five years, with demand and sales going through the roof. The resulting surge in prices has eroded the affordability of detached or semi-detached homes, leaving condos as a more affordable real estate option for some buyers.
“Given the rapid price increases in detached dwellings sustained over the last few years, condos may be the only option for some homeowners — and many first time buyers — in selected markets,†said Craig Alexander, TD's deputy chief economist. “Potential condo buyers are acutely aware of the lower price tag associated with these dwellings.â€
In Vancouver, the priciest place in Canada to buy real estate, the price tag for a condo is half that for a detached bungalow, the report said. In Calgary and Toronto, condo prices are one-third lower.
A TD survey conducted in March found 39 per cent of Canadians would consider buying a condo as their main living space, a 4-per-cent rise from last June.
In addition to price, lower maintenance costs were cited as a major reason for the increased interest. Security, attractive design and environmentally friendly features, like better energy efficiency, were also noted as reasons to look more closely at condos.
Location was another reason, with buyers saying they wanted to be close to public transit, retail outlets and entertainment.
From 2001 to 2006, condo starts have surged, on average, more than 16 per cent each year. In the last decade, condos have climbed from nearly one-fifth of all new home construction to almost one-third. Despite the increased construction, robust demand has gobbled up all of the additional units and boosted prices, the report said. Low unemployment and favourable interest rates will continue to provide support.
Demand for condos will remain strong in this year and next, as activity in Central and Eastern Canada moderates and prices continue to edge higher, TD forecast. The condo market in red-hot Western Canada will mirror the overall pattern in the housing market and likely start to cool as new supply comes onto the market, easing demand and reducing speculation.
Condominium prices in the West will slow from last year's pace, but still log double-digit gains this year, TD said, while prices in the rest of the country will advance in the mid-single digits.
However, declining affordability will start to affect condo buying in some cities, mostly those in the Western markets. The pace of condo starts is expected to fall 6 per cent in the next 18 months, dampening – slightly – resale price growth. In the rest of Canada, markets are more balanced and there will be little change.
A number of structural trends will support condo prices in the long-term, TD said. The median age of people in Canada is expected to climb to between 45 and 50 by 2056, and this, combined with the fact that Canadians are living longer than ever before, will be positive for condos. Older Canadians may prefer condos as they downsize their living spaces.
If cities continue to expand faster than rural communities, demand for condos will remain strong. Finally, 72 per cent of all newcomers to this country settle in Toronto, Montreal and Vancouver, cities that are also the largest condo markets in the country.
Globe and Mail Update
May 17, 2007 at 4:33 PM EDT
Soaring prices for detached homes have sent buyers flocking to condominiums in recent years, but a new report from Toronto-Dominion Bank says the greying of the Baby Boom generation, newcomers to Canada, and continued urbanization will bolster demand over the long term.
Canada's housing market has been on fire in the last five years, with demand and sales going through the roof. The resulting surge in prices has eroded the affordability of detached or semi-detached homes, leaving condos as a more affordable real estate option for some buyers.
“Given the rapid price increases in detached dwellings sustained over the last few years, condos may be the only option for some homeowners — and many first time buyers — in selected markets,†said Craig Alexander, TD's deputy chief economist. “Potential condo buyers are acutely aware of the lower price tag associated with these dwellings.â€
In Vancouver, the priciest place in Canada to buy real estate, the price tag for a condo is half that for a detached bungalow, the report said. In Calgary and Toronto, condo prices are one-third lower.
A TD survey conducted in March found 39 per cent of Canadians would consider buying a condo as their main living space, a 4-per-cent rise from last June.
In addition to price, lower maintenance costs were cited as a major reason for the increased interest. Security, attractive design and environmentally friendly features, like better energy efficiency, were also noted as reasons to look more closely at condos.
Location was another reason, with buyers saying they wanted to be close to public transit, retail outlets and entertainment.
From 2001 to 2006, condo starts have surged, on average, more than 16 per cent each year. In the last decade, condos have climbed from nearly one-fifth of all new home construction to almost one-third. Despite the increased construction, robust demand has gobbled up all of the additional units and boosted prices, the report said. Low unemployment and favourable interest rates will continue to provide support.
Demand for condos will remain strong in this year and next, as activity in Central and Eastern Canada moderates and prices continue to edge higher, TD forecast. The condo market in red-hot Western Canada will mirror the overall pattern in the housing market and likely start to cool as new supply comes onto the market, easing demand and reducing speculation.
Condominium prices in the West will slow from last year's pace, but still log double-digit gains this year, TD said, while prices in the rest of the country will advance in the mid-single digits.
However, declining affordability will start to affect condo buying in some cities, mostly those in the Western markets. The pace of condo starts is expected to fall 6 per cent in the next 18 months, dampening – slightly – resale price growth. In the rest of Canada, markets are more balanced and there will be little change.
A number of structural trends will support condo prices in the long-term, TD said. The median age of people in Canada is expected to climb to between 45 and 50 by 2056, and this, combined with the fact that Canadians are living longer than ever before, will be positive for condos. Older Canadians may prefer condos as they downsize their living spaces.
If cities continue to expand faster than rural communities, demand for condos will remain strong. Finally, 72 per cent of all newcomers to this country settle in Toronto, Montreal and Vancouver, cities that are also the largest condo markets in the country.