RBC released a report yesterday titled ‘Booming Toronto Condo Market Does Not Imply A Bubble”. This report provides an in depth look at the Toronto condo market within the area’s broader housing context, and draws implications for risks and future developments.

The report has an interesting hypothesis, with the theory that a bubble arising from our booming market appears exaggerated once trends in the overall housing market are taken into consideration. Their position is that Toronto has undergone a structural shift in what is being built, with single-family homes diminishing and condominium units replacing that housing type, such that the total number of new housing units completed by builders has not exceeded the Greater Toronto Area’s demographic requirements, and is unlikely to do so by any significant magnitude in the next few years. However, the report acknowledges the strong presence of investors in the condo market, and raises the risk of a mismatch among the types of units supplied and ultimately demanded for occupancy. Yet, at this point, they do not equate this risk with a bubble.

Click HERE to read the whole report.

The argument that the overall supply of housing matches the demands of demographics has merit, but it doesn’t shift our concerns about the potential oversupply of the ubiquitous teeny tiny boxes-in-the-sky that dominate our urban jungle. As we postulate in our own Summer 2012 Real Estate Forecast:

“What has sustained the Toronto housing market in the past and will continue to support it in the future is the tried and true mantra of ‘location, location, location’. Proximity to green space, public transportation and a village-shopping environment will still be major drivers in the value of any property. When we look at the condominium market as a whole, there are swaths of ubiquitous car-friendly pedestrian-windy architecturally-banal socially-isolated could-be-anywhere mid and high-rise towers chock-a-block with one-size, one-style, one-occupant suites. The fueling engine of a long-running real estate boom have produced so many of these placeless spaces they dominate the condominium market.

When it comes to making a condominium purchase, avoid these common cracker jack boxes in the sky which dominate the condominium market, as they’re the properties most likely to suffer in a market adjustment. Instead, seek the extremely special gems that reflect the true ideals of contemporary collective living. Look for as many of the following criteria: a well-designed well-proportioned well-built space plan; features that are rare and desirable including high ceilings, attractive views, abundant light, outdoor space, gas cooking, or a fireplace; situated in a stable, reputable, primarily owner-occupied complex that is ideally at least two or three years old (so that all those first-to-list suites are now re-sold and the building is well-managed and operating smoothly); and located in a stellar demand identifiable neighbourhood coveted by the local market (like the St. Lawrence Market, Queen West Village, or College Street).”

If you’re curious to read more of urbaneer.com’s point of view on Toronto’s real estate market, click HERE to read our Summer 2012 Real Estate Forecast Part 1.

Please know we’re here to help!

~ Steven

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Real Estate