Tuesday 21 May 2013

Toronto Condo Bubble in Perspective

At one point in time, Las Vegas was thought to be a jewel of the desert and a place of renaissance as it was in the process of becoming Manhattanized. As we now know, it was all a hoax. Las Vegas isn't Manhattan and neither is Toronto. 

Over 66% of the new condo units to be completed in 2014 are going to be one bedroom or smaller. The average condo apartment size of the 2014 cohort is a staggering 695 square feet. What a wonderful space to raise a family. Squeeze in a dog and your picture perfect life is complete. 

Seriously though, who buys those one bedroom shoeboxes? Professional couples who plan to have babies one day or hipsters attending Ryerson? That's what we assume, right?

The fact of the matter is that in some downtown buildings, more then 70% of the units were sold to investors. The reason why more and more condo buildings are being built is not because of the changing culture, but because speculators are willing to subsidize the twenty-something renters who are downtown for a good time, not a long time. 

Toronto is not Manhattan. It's just a giant construction bubble! There are more condo buildings under construction in Toronto than in New York (which has triple the population). To put this into perspective, take a look at the chart below:




 

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