Thursday, August 29, 2013
No condo bust for Canada
A new report from the Conference Board of Canada predicts that the much-watched condo sector will avoid an ugly downturn, even in Toronto.
Economists and policy-makers are keeping a close eye on condos, especially in the country's most populous city, where cranes dot the sky. A number of economists say that too many units are being built, a development that would put pressure on prices. The Bank of Canada has highlighted the risks that this market could pose to the economy.
Condo sales plunged in most Canadian cities last year, and are expected to be down again this year.
But Wednesday's report, which was done for mortgage insurer Genworth Canada, argues that the market will not sink too low, and will be propped up in part by population growth and modest employment gains.
While the report does say that higher mortgage rates could cool things off later this year or early next year, it adds that "a flood of foreclosures, and subsequent sharp supply increases, is simply not in the cards."
Homeowners are taking advantage of low interest rates to pay down their mortgages, offering a cushion when it comes time for them to renew, it says.
"Markets in Toronto and Montreal are cooling, but we think they will avoid major downturns, partly because, on the demand side, demographic requirements remain decent," the report says. "Also, the banks will continue to require builders to have healthy pre-sale levels before advancing construction financing, keeping supply somewhat in check."
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For information on Condominium market bust in Ottawa, please click here