Toronto Skyscrapers Aren't Falling In Prices
It should not take us by surprise that World Class City Toronto, one of the best liveable cities on earth, is the leader in constructing the most skyscrapers. However, the Canadian government implements tighter mortgage rules to cool down the Canadian housing market and there have been many talks about the oversupply due to disproportionate over-building of downtown Toronto condos. According to most of the analysts, sky-high prices for downtown condos are bound to fall due to less demand as supplies are exuberant and buyers are reluctant to enter the market because of the eminent housing market crash due to tighter mortgage rules. But is this the case?
Yes, there are some depressing numbers when you look at the last quarter of 2012. There were 3800 condominiums sold in downtown Toronto. This is a 23 percent decline over the last quarter of 2011. In terms of new condo sales, the number looks even worse. New condo sales were down 47 percent in downtown Toronto. However, defying these falling numbers, the total new condos under construction hits a record high of 56,900 in 2012 and new condo constructions starts a record all time high 24,390.
Now let's look at some positive numbers. During the first 2 weeks of February, there were 2800 sales in the greater Toronto area. This was down roughly 8 percent more than last year, but the number of new listings was lower too. Average home price was $509,000, which represents a 4 percent increase than last year. Average home price was $775,000 in downtown Toronto and one third of the homes were sold above the asking price.
There have been some bidding wars in downtown Toronto where supplies were low. With so much market crash speculation, downtown Toronto districts were able to keep prices fairly stable and a price increase was even noticed. For example, Toronto downtown's biggest condo district, C01, dropped only 1.66 percent in January than one year before and district C08 actually showed a 4 percent increase in prices.
So, will skyscrapers fall in Toronto in prices? It does not look like that way based on recent market activities. As Toronto downtown has enjoyed double-digit job growth from 2006 - 2011, more professionals are making skyscrapers their homes, pushing the demand high for condos. IMF recently predicted that Canadian residential real estate market is 10 percent overvalued. However, 10 percent overvalued homes, among other factors, may not be enough to make Toronto skyscrapers fall in prices.
First Published: March 12, 2013 on RealEstateExpedition.com