​Condo market well supported, say economists

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Fear not, naysayers, the condo market may not be as overheated as some may lead you to believe; at least according to one big bank. But will this latest report be enough to force the bears into hibernation?

“Healthier demographics are benefitting trends in household formation,” Benajamin Tal, CIBC’s deputy chief economist wrote in a note coauthored with Nick Exarhos, a fellow CIBC economist. “In fact, despite some concerns of overbuilding in the current housing boom, the ratio of housing starts to household formation is not far from its long-term average of 1.03.”

The reason for the pairs’ optimism about an oft-debated market is the high number of immigrants expected to migrate to Canada; millions of people who will look to enter the real estate market and, in many cases, the condo markets.

“Ask any real estate developer in any of Canada’s major cities about the risk of overbuilding, and the first line of defence would be immigration and its critical role in supporting demand,” the two wrote. “It turns out that at least for now, this claim is more valid than widely believed.”

According to the report, immigrants account for 70 per cent of Canada’s population growth and 50 per cent of those new Canadians are in the prime home buying cohort of 25-44.

The pair concludes that the pace of growth within the echo generation will be offset by an increased immigration quota of 10,000 more entrants per year.

 “For the here and now, any claim of significant overbuilding in the Canadian market is not supported by the rise in household formation relative to starts,” they wrote. “The trend in Canada’s homebuilding means that the eventual wind-down in the current boom won’t have to be as dramatic as feared by some."
  • Saurabh Sabharwal on 2014-12-01 10:28:43 PM

    Very well said and I totally agree. I've had chat sessions with top guys at Lanterra and Easton's group of Hotels and they all say it is important to talk to people on the field (rightfully so) that are actually making these projects rather than just write articles based on observations and blasting them in the media

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