Bank of America Wades into Condo Mania Debate

As reported in the Financial Post on Wednesday, October 19, 2011 [ http://natpo.st/qNfmS8 ] , the Bank of America Merrill Lynch Global Research is suggesting that theToronto condo market is overheated due to an excess supply and a potential drop in demand.  BOA assumes that since over 60% of the units are being purchased by investors, the bulk of the units will be used for rental.  The rental market, the report suggests, cannot absorb the potential 35,000 coming onto the market.     This is to be contrasted against the reality of the condominium rental market where there is a shortage of rental units and price wars are occurring between perspective tenants.  The report ignores the total lack of new construction in theTorontorental market and the continuing immigration into the GTA, necessitating a need for housing.     As previously reported earlier this week on our blog, Shaun Hildebrand, CMHC's senior market analyst for the GTA, disagrees with the report.  The general consensus inTorontois that there is in fact a shortage of rental units, not an excess supply.     The report goes on to compare us to the collapse of theKelowna, B.C. market where construction increased 9-fold from 2000 to 2008, and suggests that this could serve as a warning toToronto.  In a market likeTorontowhere there are 80,000 to 100,000 new immigrants per year to a place likeKelownawhich is a retirement community, the comparison is somewhat preposterous.     Given the dismal state of housing in theU.S., the Bank of America is clearly looking for someone else to share the misery, but don't hold your breath.  TheTorontomarket is healthy and with interest rates low and the economy stable, it has a long way to go before it sees any significant correction.   Tweet