The Toronto condo market appears to be overheating and could soon be flooded with excess supply, says a new report from Bank of America Merrill Lynch Global Research.

The report is a rare warning in a condo market that most analysts say will continue to be supported by low rental vacancy rates and strong investor demand.

The market for condominiums in Canada’s biggest city could undergo a significant correction and stagnant construction over the next several years, economists Ryan Bohren and Sheryl King say in the report.

“We think investors are underestimating the wall of inventory about to come on the market in the next 12-24 months, which could dampen price appreciation and investor returns,” the authors said, adding Toronto could follow the path set by a recent overbuild in Kelowna, B.C.

They say multi-unit-dwelling construction across the country has surged back to record peaks. Toronto in particular has seen the strongest condo boom in more than a decade, with record numbers of units under construction. They noted that anecdotal evidence suggests up to 60% of preconstruction sales in the city are to investors.

The natural household formation rate for Toronto is estimated at 30,000 to 35,000 annually and apartments historically represent about 35% of that, or 12,000, the authors say.

“With apartment completions currently running at 18,000 and 37,000 condo units currently under construction, there is about 4.8 years’ worth of inventory in the pipeline,” Mr. Bohren and Ms. King say. That supply about to hit the market could put downward pressure on resale prices and rents.

View full article at Toronto’s condo boom about to bust: report

The 6.5 per cent annual gain is the smallest since January.

CREA stats show the average selling price in September fell by a seasonally-adjusted 0.4 per cent from the month before. Big month-over-month declines were recorded in Victoria (down 9.7 per cent), Saguenay (down 11.9 per cent), and Vancouver (down 3.7 per cent).

Market ‘healthy’

The figures suggest that Canada’s housing market remains in relatively good shape despite some economic headwinds, market watchers say.

“Canadian housing continues to look balanced and healthy, as low mortgage rates and a falling jobless rate are offsetting weaker consumer confidence and tighter mortgage rules,” writes Robert Kavcic, an economist at BMO Capital Markets. “We continue to expect sales and prices to cool in the year ahead, but the landing should be a soft one,” he says.

View full article at Average home price rises 6.5% to $352,600

One Bloor condo building was a project that died with Lehman Brothers. It has not stayed dead for long.

Originally meant to stretch 80 stories over Toronto’s luxury shops of the Yonge and Bloor area, the condo building that would host a hotel and swath of stores (supported by the American financial powerhouse that had survived the Depression but not subprime mortgages) was not built in 2008. The next year, the developers mulled a scaled-back version. And then, nothing. For months, the lot stood empty, symbolic of a world that collapsed into recession.

And in 2011? The building is going up and the condos are being sold. Welcome to Canada.

View full artical at Despite the Downturn, Canada Prospers

Toronto’s condo boom is not slowing down anytime soon as the latest statistics show the city is building more high rises than anywhere else in North America.

The September 2011 data from German research company Emporis — the world’s largest source of information on multi-storey buildings — is included in a presentation to be discussed by the city’s economic development committee on Friday.

There are currently 132 highrise buildings under construction in Toronto, according to the figures. Mexico City ranks a distant second with 88 and New York City is in third with 86. The field drops off dramatically after that: fourth-ranking Chicago is building 17 highrises, while Miami rounds out the top five with 16.

Emporis defines a highrise building as between 35 and 100 metres high, or 12 to 40 floors. Buildings taller than that are considered skyscrapers.

Toronto already has the second-highest number of completed highrises and skyscrapers in North America, with 1,875 — just ahead of Mexico City and Chicago — according to Emporis. They all trail runaway leader New York City by more than 4,000, however.

PHOTO GALLERY: TORONTO’S DRAMATICALLY CHANGING SKYLINE SINCE 1919

Provincial and municipal land intensification policies, such as Ontario’s Greenbelt, have led to a shift away from low-rise development in the city, said Matthew Slutsky, founder and president of BuzzBuzzHome, which catalogues new residential projects in Canada.

“If you combine the construction with low-rises, the overall building is about average for Toronto,” he said, calling the growth of high-density development along transit lines a “fantastic” alternative to suburban sprawl.

“What we’re seeing is actually a tale of two housing markets, with low-rise in a substantial decline and highrise in steady increase,” George Carras, president of RealNet Canada Inc., wrote in the Star earlier this year.

View full article at Highrises? We’re tops on the continent

The country’s leading real estate broker said on Wednesday the average price of a home in Canada increased between 5.7 percent and 7.8 percent from July through September compared with the same period the previous year, a deceptively big gain because the third quarter of 2010 had been weak.

“The strength in Canada’s national housing market conceals signs of predictable softening in some regions,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services.

“The third quarter saw a return to a normal seasonal business cycle as price appreciation slowed in many areas — with some average values even receding — after the busy spring trading season.”

Soper said a broader slowdown is expected as the economy struggles to gain traction as global growth falters. Even so, he said, “fears of a U.S.-style correction are completely unfounded.”

View full article at Home prices rose in quarter, slowdown seen

MONTREAL — Canada’s housing market stands out globally for its strength but economic uncertainty and weaker consumer confidence could keep potential new buyers on the sidelines, a Scotia Economics report says.

“Overall, you’re probably in an environment where businesses and consumers will be a little bit more cautious and that would spill over to the housing market,” Scotiabank senior economist Adrienne Warren said Tuesday after the report.

The Scotiabank report said Canada’s housing market is notable for its “resilience and longevity.”

And even though Canadian real estate prices were up five per cent year-over-year in the April to June period, they started to level out in July and August, Warren said from Toronto.

“I just think the other factor we’ve seen in the slowing and softening of prices just reflects the fact that the housing market itself has become fairly balanced between the number of buyers and sellers out there,” she said.

“If anything, I think the cooling off in prices is positive for longer-term affordability for buyers.”

While interest rates are expected to remain low for some time, the Canadian economy is showing signs of losing some momentum, a factor that would affect house purchases.

Read full article at Canada’s housing market strong globally

The monthly report on the Teranet-National Bank Composite House Price Index, which measures price changes for repeat sales of single-family homes in six metropolitan areas, showed overall prices were up 1.3 percent in July from June.

Overall prices were up 5.3 percent from a year earlier.

Canadian house prices dipped during the recession, but bounced back quickly and have kept climbing, fueling talk of an overheated market, if not a housing bubble.

The index notched its fourth consecutive monthly increase of more than 1 percent in July. In contrast to the three previous months, however, prices did not rise in all six metropolitan markets surveyed.

Read full article at Home price index hits record high in July

Andrew la Fleur likes to boast that he owns the smallest condo in Toronto right now — a 301 square foot studio in the Regent Park redevelopment.

But he knows his bragging days are numbered.

Slated to open in spring 2013 is the newest small thing to hit Toronto’s exploding condominium market — a 270 square foot studio in Canderel Residential’s DNA project on King St. W.

“We may be reaching a breaking point,” says la Fleur, 31, looking around his tasteful but tiny condo he bought for $166,000 in the pre-construction phase a year ago and plans to rent out for $1,000 a month.

“It’s hard to know how the market is going to respond to super small condos. Hundreds of them exist on (blueprint) paper right now, but very few of them have actually been built yet. They have never existed in Toronto before.”

La Fleur’s bright, 12th floor unit stretches to a relatively palatial 389 square feet if you factor in the balcony and don’t mind having your dinner parties outdoors.

Year round.

It feels like a hotel room — although even they average 350 square feet — except for the dark laminate flooring and chic granite-clad kitchen. It’s closet-space challenged: There’s a stacked washer and dryer where you would expect to hang your clothes.

Read full article at These tiny GTA condos smaller than hotel rooms

The city’s housing company has given up plans to build a 322-unit affordable housing building in the Railways Lands condominium development west of the Rogers Centre.

The large 1.2-hectare (3-acre) site sits beside Canoe Landing Park, the park with the big red canoe that serves residents of nearby condo towers built by developer Concord Adex.

It was to be home to a 43-storey affordable housing building, but — citing a lack of funding — the Toronto Community Housing Corp. has turned back the site to the city, and the city is now pondering what to do.

A member of council’s affordable housing committee said he fears Mayor Rob Ford’s administration wants to sell the site to shore up the city’s finances.

Councillor Joe Mihevc’s first reaction was negative. “They want to monetize it; you can smell that a mile away,” he said. But later in the day, after researching the issue, he concluded the project would cost $40 million and eat up almost half of the $108 million recently allocated for affordable housing in Toronto by the province and the federal government.

Local Councillor Adam Vaughan would prefer to see funds from any land sale allocated to build affordable housing elsewhere in his ward.

Two schools, a community centre and daycare are also to be built on the site, now a hole in the ground, and construction must begin to utilize $38.5 million already raised from development charges to build the facilities, Vaughan said.

“We don’t have sufficient provincial or federal funding to build public housing on site. We’re going to sell to a private developer,” he said. “I would rather put the money from that back into public housing somewhere else, but my guess is they’ll use it to balance the budget.”

Read full article at TCHC scraps housing project

Scotiabank’s latest real-estate outlook said Tuesday that Canada is showing a resilience that few other countries have been able to maintain.

“In the majority of the major markets we track in North America, Europe and Australasia, inflation-adjusted home prices declined on a year-over-year basis in the second quarter of 2011,” said Scotia Economics senior economist and real estate specialist Adrienne Warren.

“While Canada’s hot housing market also has begun to cool, it remains a notable outperformer.”

The bank noted that of the nine major developed markets it tracks, only Canada, France and Switzerland showed housing price increases year over year.

Read full article at Canadian housing market outperforms the developed world