New condos are still shooting up to crowd the Toronto skyline, but behind the scenes the condo boom times are ending, a new report predicts.
Were expecting a slowdown in 2009, said Jane Renwick, editor and vice-president of Urbanation, a condominium market research company.
So we would say that we were at 22,000 [condo] sales at the end of 2007. Were predicting 16,000 sales to round out this year. And were expecting sales to dip beyond that in 2009.
Urbanation released a report yesterday about the Toronto condo markets second quarter of 2008.
Following record condo sales in 2007, she said, the market is now back to 2005 and 2006 levels.
Currently, she said, the market appears more normal and predictable, with sales volumes returning to earlier levels and prices climbing slightly.
But economic woes in the United States, a high dollar and a loss of manufacturing jobs, she said, are pointing toward a recession and a condo market contraction.
Were not predicting a crash by any means, she said. I would say that well have a correction in terms of sales volume, but I dont think well have the same correction in terms of price.
The good news, she said, is that this contraction shouldnt be on the level of the condo market crash of 1989 to 1991.
Starting in 1986, she said, prices started increasing by 6 and 7%, quarter over quarter. In 1987, the price increases exceeded 20%, year over year.
At the end of 1988, condos were selling for 39% more than the year before. And in 1989, there were a couple of quarters with 40% price increases, year over year.
Those things say a correction is inevitable its price inflation, she said.
And the result, she said, was that in 1991 and 1992, condo pricing dropped by 17%, 16% and 15% year over year.
But this time, she said, the price increases are more modest.
In 2007, she said, price inflation was between 10 and 12%, year over year, relative to the year prior; now its at 8%.
There was some price inflation last year which always happens in a heated market, but it didnt get out of control to the point where it was requiring a correction to bring it back down in line with value, she said.
The number of condos being built, she said, are likely to decline from both a rise in construction costs and a credit crunch in the banking sector, which is making it tricky for less-established developers to find financing.
So ABC developer launches a building, thinking everything is fine with what they consider the historic pre-sale requirements in order for the financing to kick in, she said, and the banks are saying we actually dont have an appetite for this because we cant.
Even if supply diminishes, she said, Urbanation predicts that prices will flatten out as opposed to rising.
Were also saying that the demand will wane hopefully those two things happen in unison and create some kind of balance, she said.
Maureen ONeill, the president of the Toronto Real Estate Board, said that the advantage to the current softening real estate market is its stability.
Because its declining, its correcting, its balancing to make it a lot more stable, she said. At least now we know what were looking at.