Toronto's biggest condo developer, is already fielding calls for the
783 units of Ten York and plans to start selling in April, more than a
year before the C$295 million project begins construction.
"There's a tremendous amount of interest," said Jim
Ritchie, senior vice president of sales and marketing for Tridel. "We
have thousands of names of people who want to buy here."
Developers sell most units of a project before
building begins, and many investors buy the condos to either resell or
rent out when the construction is finished. Rental units accounted for
24 percent of all condos in Toronto last year, up from 21 percent in
2010, according to CMHC.
A total 8,250 condo apartment rental units were added
to Toronto last year, CMHC said. The average vacancy rate for Toronto
rental condos was 1.3 percent last year, down from 2 percent in 2010.
Toronto's rising prices for townhouses and
single-family homes are driving more homebuyers into condos. In January,
the average price for a detached home in Toronto was C$543,993, up 15
percent from the same month in 2011, according to Toronto Real Estate
Board. The average price for a condo was C$343,835, up 5 percent.
U.S. housing prices plunged by a third between the
peak of July 2006 and November 2011, according to S&P/Case-Shiller
Composite-20 Home Price Index. By comparison, Canadian housing prices
rose 32 percent in the same period, according to the Teranet-National
Bank National Composite House Price Index.
Toronto isn't facing a bubble because price increases
have been steady, said Ben Myers, executive vice president of
Urbanation, a Toronto-based real-estate research firm.
"We've seen the same level of increase in the market
year- over-year in terms of index pricing in 10 of the last 15 years,"
Myers said. "If we didn't have an explosion of the bubble in those
years, I'm not sure what would cause it to happen now."
The housing gains have sparked worries that CMHC,
Canada's federal mortgage agency that insures some mortgages, is
becoming overexposed to a potential slump, leaving taxpayers at risk.
Canadian Mortgage & Housing said Jan. 31 that it's
rationing mortgage insurance for lenders as the housing agency
approaches the C$600 billion legal limit for backstopping the loans.
Lenders have increased their demand for insurance of their mortgages
amid "liquidity needs" since the 2007 financial crisis, CMHC said.
Lenders are becoming "increasingly liberal" with
mortgages that don't require borrowers to verify income, OSFI said in
the documents obtained by Bloomberg News.
Finance Minister Jim Flaherty said that he's concerned
about loosening of standards by some Canadian financial institutions on
those types of mortgages, and steps are being taken to "correct" the
Toronto-Dominion Bank Chief Executive Officer Edmund
Clark said in a Feb. 8 interview at Bloomberg's New York headquarters
that banks are tightening lending on loans for condominiums.
Toronto-Dominion, Royal Bank of Canada and Canadian Imperial Bank of
Commerce scrapped their promotional 2.99 percent mortgage rates last
week, less than a month after they were introduced.
"Banks are leaning against it in the condo market
right now and leaning against it in the unsecured lending market and
just a general leaning against borrowing," Clark said. He said the
changes may lead to a "successful soft landing" for the housing market.
The government has already taken measures to restrain
the housing market, including reducing amortizations and requiring
stricter criteria for mortgage qualifications. Housing price gains have
slowed in the past three months.
Still, housing markets in Vancouver and Toronto have
become "severely unaffordable," according to a January report by
Demographia, a public policy firm.
Vancouver's median home price of C$678,000 in the
third quarter was 10.6 times its median pretax household income of
C$63,800, making the city the least-affordable housing market after Hong
Kong among large English-speaking cities, Demographia said. Toronto's
home price of C$406,400 was 5.5 times household income of C$73,600, a 40
percent deterioration in affordability since 2004.
Fallout from Toronto's construction boom may not surface immediately, according to Queen's University's Andrew.
"It's going to be three-and-a-half to four years from
now when these loans are all coming up and you've got a number of people
who say they can't afford to refinance it, so they'll just sell,"
Andrew said. "They'll find out that 40 units in the building all went on
the market in the same month, and now they've got a big problem."
--With assistance from Andrew Mayeda, Ilan Kolet and Theophilos
Argitis in Ottawa and Sean B. Pasternak in Toronto. Editors: David
Scanlan, Jacqueline Thorpe.
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