An international construction industry organization is raising new red flags about record levels of home construction in Canada's major cities.
More than a quarter of Canadian construction industry professionals told a new survey by London-based Royal Institute of Chartered Surveyors they were worried that Toronto's housing market was at risk of a price correction because of high levels of new home construction. Half also pointed to Calgary as a market where the level of residential construction threatened to outstrip demand amid falling oil prices, putting home prices at risk.
The study comes on the heels of a report by New York-based Fitch Ratings that warned of "unprecedented" overbuilding in Toronto's condo market. The city has more than 80,000 condo units in development, a number that has grown by 50 per cent in just four years, Fitch said.
Canada Mortgage and Housing Corporation has also raised concerns earlier this year about condo markets in Toronto and Montreal, where it said levels of new construction have reached record highs.
Despite growing fears of a record boom in condo construction, few expect the city's condo market to crash. Many of the units now under construction in Toronto reflect a surge in housing starts that dates back to 2012. The vast majority – 84 per cent – of units under development have already been sold, research firm Urbanation said in an analysis earlier this summer.
After a jump in the new condo inventory last year, the number of new units hitting the market actually fell 22 per cent in the first quarter of the year, Urbanation said, while the number of unsold units still under development dropped 10 per cent compared to a year earlier.
The falling supply of new units has helped support the resale condo market. Sales of existing condos jumped 16 per cent in the second quarter of the year compared to the same period last year, the Toronto Real Estate Board reported. Resale prices rose more than 6 per cent and now average $416,728 in the city.
"Much of the new condominium apartment inventory that has been brought to bear on the market in the recent past has been absorbed," said board president Mark McLean. "In fact, market conditions have tightened with months of inventory trending lower."