The $1-million cut-off on Canada Mortgage and Housing Corporation insurance may have hit the luxury condo market, with a glut of inventory in Toronto suggesting it will take 20 months to clear given current demand.
That doesn’t come as a surprise to lenders nor mortgage brokers, who have seen a trend among buyers to stay below the $1-million ceiling in order to qualify for CMHC backing.
“Lenders in general have cut back, and definitely everyone is nervous,” says Joe Walsh, a broker with Bedrock Financial Group Dominion Lending Centres. “Three to four years ago, all the lenders were making exceptions for clients. But now we need the big lenders, the big banks, to do these types of deals.”
Some 145 condos were listed on the Multiple Listing Service for $1 million or more in the first six months of the year. That excludes the so-called “shadow inventory,” which could easily exceed the number of high-end condos already listed.
Only 42 units of $1-million plus condos of the 145 have sold, an average of seven per month, which will take four times as long to clear as compared to conventional condominiums.
“The fact the monolines can’t do over $1 million with CMHC backing does contribute to it,” Walsh told MortgageBrokerNews.ca. “Many would like to see a lower loan to value on these properties before lending.”
And judging by the amount of construction going on in Toronto, Walsh expects a lot more condos entering the market – but doesn’t foresee it harming the downtown area.
“Everybody sees the amount of cranes that are up throughout the city, and more are coming online,” says Walsh. “But there is more confidence in the downtown condo market, as people still want the downtown location; uptown, not so much.”