Toronto Bubble

Late last fall, economists and the media were agonizing over whether or not the current buoyant real estate market in Canada was going to  continue. The Toronto market especially saw significant record sales and steadily increasing resale and new home prices, especially on the condominium side. Since last December, the Toronto housing market has enjoyed record-breaking condominium sales throughout the spring and early summer. According to RealNet Canada Inc., condominium sales from January through June 2011 were 39 percent higher than the first six months of 2010. An astounding 61 percent of new home sales were condominiums.

The reliance upon investors continues for new condominium sales, and these investment properties are essentially supplying housing to a rental market where there is a shortage of new rental units. Forecasts from bank economists, as quoted in The Globe and Mail and Toronto Star on July 16, show a variety of price prognostications for the next two years being either flat (National Bank, CIBC, RBC, BMO and Scotiabank), a 10.2 percent correction (TD Bank) or a 25 percent correction (Capital Economics). On the other hand, Steven Hurst from RealNet GTA, claims that the trend of high-rise new home sales in 2011 and solid pricing will continue based on a tight seven-month supply available for sale at the end of April 2011.

Frank Clayton, economic advisor to BILD, in his most recent GTA Residential Market commentary says that there are certain indicators and factors that may lead to a drag on housing demand, including limited growth in employment, a drop in net immigration by 17 percent in Ontario for the past year and a slippage of manufacturing shipments in Ontario from February to April after a post-recession high in January.

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