Could today’s condominium glut actually be a good thing?
Published Tuesday, December 3, 2013 4:00PM EST
Last Updated Tuesday, December 3, 2013 4:09PM EST
With major condo developments popping up across several Canadian cities and the fear of a looming “housing bubble” intimidating many buyers, a recent study finds that condominiums may actually be the future of housing in Canada.
A recent study published by Royal Lepage finds that the condo market in major cities such as Toronto, Montreal and Vancouver is expected to grow considerably over the next two decades.
The study notes that in 2011, condominiums accounted for nearly 15 per cent of the housing market, with more than 650,000 Canadians living in condominiums. Experts suggest that growing consumer demand for new condos over the next 20 years will mean that condos will eventually account for up to 53 per cent of the housing market.
Will Dunning, housing market economist and author of the report, says exceptionally low interest rates, greater job opportunities in major cities and a shift in consumer preferences towards urban neighbourhoods will boost the condo market in the coming years.
While condo development currently exceeds consumer demand, the study notes that there is no threat of a “housing bubble” as condo construction is expected to slow down in the next two to three years and better align with growth rates and changing demographics.
Phil Soper, President and Chief Executive of Royal LePage, told CTV New Channel that while there certainly is an over-saturation of condos in the current housing market, he expects the numbers to eventually balance out.
“We’re going to have a short term over supply, particularly in Montreal and Toronto, for the next 18 to 24 months. But the new projects have slowed down, probably in reaction to this short-term oversupply. So in the three to five year range, supply and demand are looking like they’re evening out nicely,” Soper said.
The study also finds that condo prices have increased at rates similar to those for single-family homes. In Toronto, condo prices rose by 5.1 per cent compared to 5.9 per cent of single family homes.
Overall, Dunning says the future of the condo market in Canada will depend on a variety of factors.
“The longer-term role of condos depends on several variables, including shifting demand patterns, pace of project completion and changes to mortgage rules,” Dunning said in a statement.
Dunn also notes that many new homebuyers are looking to live in urban neighbourhoods that are closer to work and offer local amenities.
Soper says buyers who may be interested in purchasing a condo should keep an eye on the market.
“I’d say a good rule of thumb for homebuyers is think the overall market, track the overall market. In the short term, in major cities, particularly Montreal and Toronto, I think we expect to see quite flat condominium prices for the next two years.”