The country’s hottest housing market is trending to levels not seen since the last recession, according to one major bank.
“Despite a sharp 20 per cent increase in Toronto housing starts in March, there has been a trend decline in new home construction in Toronto since early 2013,” TD Bank wrote in its latest economic report. “The current level of starts is well off the peak reached in 2012, and on a six month moving average the pace of new home construction in Toronto is hovering near 2008/2009 recessionary levels.”
According to TD, Toronto’s housing market is trending in two different directions; with the single-family market remaining hot and the condo market cooling.
However, condo development still accounts for 80 per cent of construction activity in the Greater Toronto Area, which concerns the bank.
It points to the fact that there are three condos available on the market for every one sold, compared to the detached home market, which has 1.5 listings for every sale.
“Analysts have been warning for years that the Toronto housing market was overbuilt. Yet, despite lofty levels of building, delays in project completions have contributed to a tighter market than otherwise would have been the case,” TD wrote. “However, the most recent data suggest that completion rates have started to accelerate. Completions were three times their historical average in January and February of this year.”
However, not all is entirely bleak in Ontario’s capital city.
“TD Economics is not expecting a crash in the condo market, but a cyclical cooling off,” TD wrote. “New construction is prone to periods of overbuilding, followed by a period of underbuilding.”