The Conference Board of Canada has released a report that states condo prices will still be rising at about 1.3 percent next year but down dramatically from last year’s 7.4 percent peak in large part because of the government’s new mortgage rules and sluggish economic growth impacting how much people can afford. The slow economic recovery especially has seen overall condo sales drop 1.2 percent with construction on new ones slowing down as well to match the softening market. Together with traditional family homes having become so unaffordable at an average of over $500,000 in July, analysts believe that as condo prices begin to stabilize, they will pick up a lot of the lost sales from those family homes.
Robin Wiebe senior economist for the Conference Board says that because of these numbers condos will be the much more affordable alternative in housing for the over 100,000 people, many of them immigrants who settle in the GTA each year. Many baby boomers are also reaching their 60s and are looking to downsize their homes to smaller, less maintenance condos. Wiebe believes these contributing factors will continue to prop up sales for the already developed condos despite the worry over rising interest rates having an impact on how much money people can borrow.
The Conference Board says the amount of unsold condos now stands at 800 units, a number expected to increase by 25 percent as new buildings are finished with construction. But that amount of vacancies they believe will help flatten condo prices and over the long term, boost some of these projected sales back into commission. Wiebe believes the message is coming across to bankers and developers alike that if sales are already slowing and construction is still largely underway on new development, the time may be right to hold back a little.
“Maybe it’s time to just slow the pace a little bit for a while.”