Toronto condominium market lags behind housing boom
October 9, 2009
The Toronto housing market may be on the way to recovery but the condominium sector is lagging behind, according to a report.
The lowrise market of existing bungalows and single detached homes showed moderate price increases in the third quarter of 2009 compared with last year but condo prices fell 3 per cent, says Royal LePage Real Estate Services Ltd.
"There is a substantial amount of product that is coming onto the market which is causing the small drop in pricing," Royal Lepage CEO Phil Soper said in an interview Thursday. "This is one of those times in the market when builders may have got ahead of the supply issue, and this is likely true of Toronto more than any other city."
Some analysts repeatedly have warned of a looming oversupply of condos. More than 35,000 units are under construction, according to Canada Mortgage and Housing Corp. The small drop in existing condo prices is not significant but some analysts worry that it could be the start of a longer-term trend.
However, even with short-term stresses in the market, the long-term view is positive, said Soper.
"If we continue to grow economically and attract immigration, and if young people continue to aspire to home ownership, the future is sound. Right now, condos are the only plausible way to afford a home in the downtown core."
The market is holding up remarkably well in the third quarter overall. Despite the recession, strength in the lowrise sector and an undersupply of homes has led to bidding wars, says Royal LePage.
The price of an average existing bungalow edged up 0.8 per cent to $436,85, from the same quarter last year and a standard two-storey home is up 1 per cent to $561,725. But the average price for a standard condo slid -3.0 per cent to $300,526. Strong activity in the existing homes market is spilling over into the new homes sector, where housing starts surged in September by a seasonally adjusted and annualized 25 per cent from a month earlier, according to figures also released Thursday by CMHC.
"The sharp recovery in housing demand is beginning to work its way into the residential construction sector in Toronto," said Shaun Hildebrand, CMHC senior market analyst.
Single detached homes and multiple family homes, which includes condos, both showed improvement. A home is considered "started" once concrete foundations are poured. Starts for single detached homes, a key segment, rose to their highest level of the year.
Single family units posted a "second monthly double-digit gain," said Millan Mulraine, economics strategist for TD Securities.
Nationally starts were down 4.6 per cent but "we've avoided the market meltdown that many areas in the United States experienced," said Ontario Home Builders' Association president James Bazely.