Condo overbuilding is a risk says bank executive

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The chief risk officer for Canada at Toronto-Dominion Bank says that overbuilding of condos is a risk to the housing market. Lisa Reikman says that the bank is watching the levels of supply in the sector and like many others, would welcome more data on foreign investors. She says that although the market is overvalued it is more like 10 per cent rather than some of the figures that have been suggested by organizations outside Canada. Lack of data on foreign investors also leaves analysts guessing about the potential impact if they were to suddenly sell their investments creating an oversupply and forcing prices down. Reikman acknowledges the concern about interest or unemployment rate rises but believes that the risk is low.

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  • Angela Wong-Liao - Invis Inc on 2014-09-03 8:30:00 AM

    I agree with Lisa Reikman at TD, I believe that we are overbuilding condos in Toronto, especially the downtown core. Our current situation reminded me of the beginning of our last recession in Toronto in 1989/1990, the condo market which leads to the whole housing market completely collapsed in 1990-1996. Unemployment rate and interest rate were high. The data of foreign investors is very essential to analysts our real exposure to potential lost if these foreign investors pulled out from the real estate market, especially the condo market. It can be many elements when it comes to foreign investors, ie: China is tightening and having a major campaign against corruption, a lot of these corruption money could be invested in the Canadian housing market and when these foreign investors pulled out from Canada, it could be a big impact to us, especially Vancouver and Toronto.

  • Tomas on 2014-09-03 10:22:58 AM

    Why don't "rich Americans" trip over themselves to live in Vancouver and Toronto suburbs like "rich Chinese" do?

    An American would realize the same benefits of moving to Canada as a Chinese would?

  • Trent on 2014-09-03 2:44:13 PM

    Right now if you can borrow at 3% and convince yourself you are making at least that from rents the prices just keep climbing so where is the downside?

    If it starts costing 4% or 5% to support these leveraged assets then it seems more worrisome: Both because you have insufficient cash flows to support the increased debt service and because higher available returns on debt present an opportunity cost.

    Then again it seems doubtful the the US can significantly increase rates without bankrupting itself so who knows?

    You lender guys are the experts on rates and they seem to be critical by virtue of the small margins investors play with currently.

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