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Workers are seen at a condo development in the Liberty Villiage area in Toronto, April/2012

Kevin Van Paassen/The Globe and Mail

A friend of mine bought a condo unit in Toronto just about a year ago.

To says she's concerned about all of the cranes cluttering up the skyline doesn't begin to cover it.

I know she's not the only one.

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People who own real estate in this city are increasingly obsessed with the record amount of building going on in the condominium market. Housing start numbers released by Canada Mortgage and Housing Corp. this week blew past analysts' forecasts.

Many are conjecturing about whether the phenomenon will lead to too many units and not enough people to fill them.

If there is a downturn – and a landing hard or soft – people are wondering whether the damage can be contained to the condo market. Are four-bedroom houses in Leaside or townhouses in Leslieville subject to the same forces?

What about a two-bedroom condo in an older building near the subway line at Bloor and Islington?

Certainly people from federal Finance Minister Jim Flaherty down to the folks spinning the "stop" and "slow" signs in front of construction sites are wondering just how many condos one city can absorb.

Already we're hearing tales about a cooling in the voracious demand for units in high-rise towers in the core.

At Toronto-Dominion Bank, economists are worried not just about the knock-on effect in the real estate market but about the risk to the entire country's economy.

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"We're very concerned about over-valuation – particularly in the condo segment," says Derek Burleton, TD's deputy chief economist.

The bank estimates that national real estate prices are about 10 to 15 per cent too high.

But a correction won't come about without a catalyst. The two most likely triggers are a sharp increase in unemployment or a sudden spike in interest rates and the economists say neither appears on the horizon in 2012 or 2013.

Mr. Burleton says there has been some decoupling between the condo segment and the rest of the market on the way up in recent years, so it's reasonable to assume there would be a different pace on a downward slide as well.

The condo segment is more of a cyclical animal than the single-family portion, Mr. Burleton says, pointing to the run-up in the late 1980s and the downturn of the early 1990s.

He adds that the condo portion of the overall market accounts now for more than 50 per cent of sales activity so it carries a lot more heft than it did in years past.

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But with so many turning their attention to the issue, can a hard landing be averted? Mr. Burleton believes it can.

He expects new construction to slow as the profits available to builders become less attractive with the rising cost of land. Also, the price run-up has not been as dramatic.

"We have not seen the same explosion of prices that we saw in the late 1980s," he says.

One largely unknown factor is the extent to which foreign investors have been buying condos in Toronto. No hard data is collected and all of the stories are anecdotal, Mr. Burleton points out.

The economist says the condo market may suffer more than the market for single-family houses if a slowdown occurs, but over the medium term he thinks it's more likely that prices for real estate will stay pretty steady with a bit of oscillation in the year-over-year comparisons.

Mr. Burleton cautions that forecasting the housing market is far from a pure science and that the eventual outcome in Toronto could range from no drop in prices at all to a 35-per-cent U.S.-style fall.

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"One could argue to the decimal place but there are just too many uncertainties," he says.

As for my friend, she's a single professional who bought a unit with lots of space in a building with low maintenance fees, a large reserve fund and good management. It's within walking distance of the subway line, shopping and parks.

So far, so good.

Still, she's worried that she paid too much when now she sees what other units in the building are going for. Fortunately, she likes living there and she's willing to stay.

Paul Johnston, a real estate agent with Right at Home Realty, says potential purchasers ask him all the time about the direction of the market. Many feel some trepidation about whether the city is getting overbuilt, he says.

Every week, seminars are telling aspiring investors how to get into real estate, he says.

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But Mr. Johnston advises buyers to think more about their quality of life than the annual rate of return on a real estate purchase.

"That has to be your first consideration," he says.

To a certain extent, he says, Toronto has split into two markets: one populated by so-called end-users who actually want to live in the place they buy and the other appealing to investors who intend to rent it out.

He also believes that good design, low maintenance fees and a coveted location will be the factors that help some properties hold their value better than others.

"In being more rare, it inherently has more value," Mr. Johnston says.

At the moment, he says, the market for low-rise townhouses, semis and detached homes close to downtown remains boisterous. He is concentrating his own business in that niche as a result.

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He thinks that dwellings in vibrant neighbourhoods will continue to attract people who want to be close to the centre.

Some are moving up from condos and some are downsizing from larger houses in the 'burbs in order to be closer to neighbourhoods such as Queen West and Ossington.

"They are living quite a way from Pizza Libretto but they want to be closer to Pizza Libretto because they're down here all the time," Mr. Johnston says.

He sees an unending appetite for modern architecture in downtown areas.

"That's a very different thing than putting up a bunch of buildings and hoping a neighbourhood develops around them. That's more about spreadsheets," he says.

Mr. Johnston is an avid believer in building density downtown. He'd also like to see more new lofts, low-rise and mid-sized buildings going into areas such as the Junction and High Park. Trinity Bellwoods and College West have been extremely popular for some time.

"The existing housing stock is already full. There are no vacancies there. Especially at the prices we're seeing," he says.

The market could soften for a time, he acknowledges, and ships rise and fall on the same tide. All the more reason to choose a place you want to stay in for a while.

"At the end of the day," he says, "you're buying a home – and you'd better like it."

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