Is Toronto's condo market a bubble or is it a balanced market? This week there were two conflicting articles circulating on the web. In one corner we have a market bear, Ben Rabidoux - a market analyst, and in the other corner we have a market bull, John Pasalis - a real estate broker.
In his article, Is Canada's Condo Boom Coming Apart at the Seams, Ben Rabidoux made a case that there are some red flashing lights that point to an end of the condo boom in Toronto. Specifically:
- Condo listings are up 8% over last year (a record high)
- Condo sales are down 18%
- 55,000 units are currently under construction with the majority set to be completed this year and into 2014
John Pasalis responded to Rabidoux's article in his post, Toronto's Condo Market - Bubble or Balanced?, and called Rabidoux's article misleading, fictitious and alarming as its purpose was not to educate readers. Pasalis cites the following reasons:
- It is wishful thinking to suggest that 55,000 units will be completed in the next 20 months
- Increase in inventory is due to decreased demand and not due to increased supply, thus an increase in condo listings is not alarming
- Condo demand fell because of mortgage rule changes (the end of the 30 year mortgage)
My Take
I don't think it really matters at this point when the 55,000 condo units will be delivered. As I showed in my previous post, the construction industry goes through boom and bust cycles. We have never built as many condos as we are building today and even the Bank of Canada admits that overbuilding has occurred.
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