Condo city (Image: picturenarrative from the Torontolife.com Flickr pool)
New research by Bank of America Merrill Lynch suggests Toronto is building too many condos for its own good, and the booming market could bust soon. “We think investors are underestimating the wall of inventory about to come on the market in the next 12 to 24 months,” write economists Ryan Bohren and Sheryl King in the report. Indeed, last month Toronto had a third more high-rises under construction than Mexico City or New York—both of which have well over three times T.O.’s population. John Pasalis, president of Realosophy Realty, wrote on his company blog that the most important condition for a bubble is in place: blind, aggressive investors. He believes expensive condos (outside of Yorkville) are most vulnerable to a lack of demand, as shown by the poor resale figures at Festival Tower and the Ritz-Carlton. Not all signs point to disaster, however: according to sources quoted in the National Post, the rental vacancy rate in Toronto was just 1.6 percent in April (versus the national rate of 2.5), and the current building blitz could be compensating for a drop in small-scale construction. Whatever the result, the cityscape is about to get a lot taller. Read the entire story [National Post] »
There is also a lot of immigration to Toronto and lets not forget the fact that condos may draw renters from the 905 area looking to get closer to the city.
October 21, 2011 at 3:37 pm | by BrianIndeed- a lot of immigration that is wealthy. Toronto is a growing city as oppose to such cities as New York and others that are at capacity.
I believe that Toronto will grow exponentially for the next 10-15 years. Eventually it has a potential to almost doubling the population.
There might be minor fluctuations, but overall the market will remain strong.
October 21, 2011 at 5:34 pm | by VadiMWe just SO want to believe the worst in everything. The simple fact of the matter is that there’s been no rental property construction in Toronto in the past decade. There are bidding war on rental flats. The city can absorb 30,000 new apartments every year. So why don’t we just stop calling them condos and instead call them apartments? Instead of big rental buildings owned by one owner – they’re big apartment buildings where the units are owned individually and rented out.
October 21, 2011 at 8:11 pm | by Raymond“I believe that Toronto will grow exponentially for the next 10-15 years.”
‘Exponentially’ would be a scary thought, since 2.5M^2 = 6250 Trillion (6.25 Quadrillion).
The immigration argument is flawed, unless there is evidence that those 30,000 new immigrants/year all live in all of the 1-bdrm condos downtown.
October 22, 2011 at 9:04 am | by Reality Check@Reality Check by exponentially i didn’t mean the mathematical sense of the word but meaning “very rapid”.
Not sure about all one bedrooms downtown Toronto, what I do believe is that Toronto has a way to go in growth. What we are witnessing right now is just a beginning. How about a population of 4M? How many apartments need to be built to accommodate such growth?
October 22, 2011 at 1:39 pm | by VadiMcondo market is going to crash. properties are currently over-valued and artificially inflated by international investors.
October 24, 2011 at 4:58 pm | by m