Toronto condos buck Canada housing crunch, but prices seen cooling

Canada’s condo boom continues to surprise, with groundbreaking in Toronto still going strong even as prices of detached homes in Canada’s largest city slump, but recent rate hikes and rent controls are likely to cool condo prices by 2018.

While many predicted the brisk construction of high rise homes in Toronto would cause a glut and eventual crash, the condo market has emerged as the stalwart survivor as a long-awaited broad housing market correction grips the city.

Developers and economists alike say condo prices, up 21 per cent in a year according to the Toronto Real Estate Board, cannot keep rising at such a pace, in part because it was their relative affordability compared to single-family homes that fuelled the boom in the first place.

“We’ve seen significant appreciation over the last 12 months and it not going to continue to grow at that aggressive rate,” said Christopher Wein, president of Great Gulf Residential, a developer with projects in Canada and the United States.

While prices may cool, the scarcity of land on which to build detached houses will continue to fuel the condo building boom, said Peter Norman, chief economist at real estate consulting firm Altus Group.

The health of the condo market is critical for Toronto. So-called multiple unit buildings account for about 40 per cent of housing starts in Canada as a whole and about 53 per cent in Toronto. By 2018, more than 62 per cent of Toronto groundbreaking will be multiples, Norman believes - nearly all of them to be snapped up by investors, not residents.