Condo prices in Toronto may have fallen steeply from their peak when you take into account incentives being offered to buyers, a Toronto developer has reportedly said.
The Globe and Mail reported Monday that a developer “who declined to be named” estimates the actual prices of condos have fallen by about 15 per cent.
The unnamed developer's assertion echoes comments commonly heard within Toronto's real estate community these days, and it suggests Canada’s largest real estate market may be weaker than recent data indicates.
With the number of condo sales falling, developers have turned to giving buyers discounts in the form of free furniture or reductions on condo fees, among other things. Thus the official sales prices remain steady, while actual prices come down.
Real estate research firm Urbanation reported earlier this month that condo sales in Toronto have fallen 18 per cent over the past year, though that survey showed prices per square foot rising a modest 2.6 per cent, to an average price of $376,000 for a new condo.
But what may be bad news for condo sellers may also be good news for condo renters. The research firm reported Monday that rentals of condos in the city jumped 20 per cent from a year earlier.
Faced with high prices and predictions of a housing market correction, many buyers have chosen to stay out of Toronto’s condo market and rent instead, placing upward pressure on the rental market. Rental prices are up 4.1 per cent in the past year, Urbanation said.
Urbanation Senior Vice President Shaun Hildebrand credited “a lack of growth in traditional rental supply” for the boom in condo rentals. (After a boom in the 1960s and 1970s, few new rental apartment buildings have been built in Toronto in recent decades.)
But even the rental market could soon be under pressure. While condo rentals spiked 20 per cent, the number of rental condos coming online grew 22 per cent, suggesting that supply is still larger than demand.
But housing market analyst Ben Rabidoux, who some see as a notorious pessimist about the Canadian housing market’s prospects, sounded a positive note on rental prices.
“Rents tend to be far stickier than prices,” Rabidoux tweeted. “Rents may decline marginally in extremely overbuilt areas, but [it’s] not likely to be dramatic.”
The Canadian housing market as a whole saw prices jump 8.4 per cent over the past year, the Canadian Real Estate Association reported last week.
To some analysts, the growth was a sign that Canada avoided the housing market collapse some had feared following Finance Minister Jim Flaherty’s tightening of mortgage rules in the summer of 2012.
But others see the growth in prices — some three times larger than income growth during that period — as a sign that Canada’s housing market is once again overheating.
They point to the fact that mortgage rates are beginning to climb following all-time lows earlier this year as a sign house prices have little room to move upward in the near future.
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