Analysis: Condo boom may avoid crash on demographics
By Ka Yan Ng
TORONTO (Reuters) - Canada's booming condominium market, which has filled the skylines of its biggest cities with cranes and prompted a warning from its central bank, may well avoid the type of crash that has hobbled the industry in the past.
While inventories of unsold condominiums are trading well above historically averages, industry executives and analysts say demographics, immigration and limited land in the biggest markets all provide long-term support.
With C$500,000 ($515,464) fixer-upper homes out of reach for many Vancouver and Toronto home buyers, condos also remain their only route to property ownership.
"I get asked with all those cranes in the sky, is there going to be a glut of supply? But if you look at the city planners' projections for demand versus projects on stream, we still don't have enough condominium projects underway in our big cities," said Phil Soper, chief executive of Royal LePage, one of the country's biggest real estate brokerages.
The condominium boom is part of a broader Canadian housing sector surge that followed the global financial crisis, in sharp contrast to the still struggling U.S. market.
After taking a brief hit, home prices and sales jumped as the Bank of Canada cut borrowing costs to a record low. Canadian banks, which escaped the crisis largely unscathed, were easily able to keep loans flowing.
Data on Monday showed Canadian housing starts for June surged well past market expectations. The multiple-unit dwellings category -- mainly condominiums -- accounted for the majority of starts in urban areas.
Supply is growing. BMO Capital Markets recently noted inventory of completed but unoccupied multi-dwelling units at 12,672 units in May, around historical highs, compared to 4,757 for single-family homes. Continued...