Toronto’s condo sector was singled out by the Bank of Canada and other economists as one of the most unstable segments of the housing market. Economists are concerned that too many condos remain vacant while development of new condos continues to saturate the region.
But the Conference Board determined that new condo starts in 2013 are down by over 7,000 units compared to development in 2012. Construction of new condos is also down in Vancouver, which is by far Canada’s most overvalued housing region, as well as Montreal.
The Conference Board report was commissioned by Genworth Canada, one of the largest mortgage insurance companies in the country. Genworth was concerned that continuous condo development would add to concerns that many current owners could end up in foreclosure as mortgage interest rates rise.
However, the Conference Board is convinced that the condo market is more stable than most economists realize, and issued a statement supporting its theory.
“A flood of foreclosures, and subsequent sharp supply increases, is simply not in the cards. Since many homebuyers have mortgages at low interest rates, they are paying down the principle component of their mortgage much more rapidly.”
The Conference Board determined that immigrants continue to arrive in waves to Canada, and that the employment market is looking more optimistic than over the last several years. These factors will help maintain demand for condos, especially for younger workers relocating to major cities for their careers.
Brian Hurley, CEO of Genworth Canada, is content that the Conference Board report predicts demand for condos will remain stable for years to come.
“Whether it’s first-time homebuyers entering home ownership, empty-nesters looking to downsize or professionals seeking a shorter commute, condos appear to remain a popular option for urban Canadians.”