You could call it “Battling Bubbles”. Two recently released reports painted vastly different pictures of the Toronto real estate market. Keep in mind that they were looking at two different scenes.
The first report looked at the Toronto condo market and said there is no bubble. (This is the market that, single-handedly, drove the finance minister to change the rules for high-ratio mortgages.) The Royal Bank report says home construction, of all types, in the GTA is keeping pace with the creation of households. More condos are being built and sold because land use restrictions limit construction of single-family homes. Builders can’t go out, so they’re going up. The report does foresee a 2% to 7% drop in condo prices and a general cooling brought on by government policy and rising interest rates.
The second report came out a day later and was much bleaker. Capital Economics looked at the entire Canadian housing market, not just GTA condos, and called for a 25% price collapse. It says the current cooling – that looks like a soft landing – is just the lag as the market adjusts to its new reality. The report cites an increasing reluctance by buyers to pay historically high prices for homes in light of the current global economy. It says federal rule changes will hit first time buyers, the largest segment, the hardest. They account for half of all new homes sales and a quarter of re-sales.