Condo market crash unlikely: Conference Board report
Published Wednesday, August 28, 2013 12:16PM EDT Last Updated Wednesday, August 28, 2013 3:14PM EDT
Two condo towers will be built on this downtown Kitchener parking lot.
TORONTO -- A growing population and continuing, albeit modest, job growth will prevent condo markets in Canada's major cities from crashing, a new report from the Conference Board of Canada predicts.
Sales are expected to fall everywhere but Edmonton this year, with eight per cent drops anticipated in Toronto and Vancouver.
And mortgage rates, which have been inching higher for the past few months, will likely further cool the market in 2014, according to the report released by mortgage insurer Genworth on Wednesday.
But an all-out crash is unlikely, even in Toronto, Montreal and Vancouver where markets are being watched with concern.
The report said a swelling population and a growing number of "condominium-loving empty-nesters" aged 55 and older will support the market, as will modest job growth over the medium term.
The report also noted the banks, which require builders to have pre-sold a certain number of units before they fork over the cash for construction of a new building, will help to prevent an oversupply of condos from flooding the market.
"As condo starts near past averages and inventories edge closer to demand, we are seeing the condo market stabilize both in terms of the price of existing units and the volume of new construction," said Robin Wiebe a senior economist at the Conference Board of Canada, in a statement.
"Softer prices and positive economic factors continue to make condos an affordable way for Canadians to achieve home ownership."
The report examined the real estate market in eight Canadian cities: Ottawa, Quebec City, Montreal, Toronto, Calgary, Edmonton, Vancouver and Victoria, B.C.
It predicted that new condominium starts will fall by at least 24 per cent in all cities except Edmonton this year.
Despite that, Toronto's inventory of unsold units is expected to rise by 71 per cent this year.
The drop in condo sales this year is expected to be most severe in Victoria -- down 15 per cent -- followed by Calgary, where sales are expected to decline by 12 per cent.
"The housing market impact of the Calgary floods should mainly be felt in the third quarter of 2013," the report states.
"Some condominium construction sites could be flooded, hampering starts."