The Canadian real estate boom isn’t quite affecting the Toronto condo market in the same way it’s been moving other types of homes. Last month there were 2,137 condo apartment sales that were completed in the 416 area, with an average sale price of $442,520 – up 21.7% according to the Toronto Real Estate Board (TREB). Sounds good, right? Not so fast.
Condos And Inflation
Despite these killer numbers, some neighborhoods produced year over year benchmark changes that weren’t so impressive. For instance TREB area C02, which roughly translates to the St. Paul’s city ward, only averaged a 0.82% increase. This increase is less than the the Bank of Canada inflation rate of 1.66% over the same period (and less than your mortgage premium). In fact, all but three city wards produced gains above the national average of 13.1% according to CREA. That’s not a very inspiring number when more than a few people are dropping the b-word.
Banks Concerned About a Real Estate Bubble
The banks recently expressed concern about a Toronto real estate bubble, with 4 out of 5 demonstrating a major movement in their books to defend themselves from a bubble. However RBC was the only one that specifically named Toronto’s condo market in their analysis. RBC economists Robert Hogue and Craig Wright expressed concerns, claiming the number of new units under construction will combine with existing sales to create an excess supply. They forecast that this will occur in more than 12 months, but stated that “this level is well into the high risk zone.”
RBC defines the risk zone as 4.5 condo units built for every 1,000 people. Toronto’s new condo construction currently lies more than 30% above that threshold, with 6 new condos being constructed for every 1,000 people.
Price data courtesy of Toronto Real Estate Board.