Unsold condo data in Toronto – long thought to be an indication of the risks posed by that hot market – doesn’t provide an entirely accurate picture of the segment’s stability, according to one economist.
“To be sure, the GTA’s condo market will be tested as interest rates start rising in the coming years, and increased resale activity from domestic condo investors will result in excess supply and some downward pressure on prices,” Benjamin Tal, deputy chief economist for CIBC, wrote in a research note released Monday. “But for now, those who look at the rise in unabsorbed units as a sign of increased vulnerability are barking up the wrong tree.”
In the note, entitled, Unsold condo units in the GTA market – an assessment of vulnerability
, Tal, admits an uptick in recently completed unsold unit traditionally offers the first sign of market trouble. And, as Tal notes, there are 2,000 completed unsold condo units in the GTA.
However, despite an increase in the number of unsold units, Tal has taken a deeper look at that data and which reveals 25% of those unsold units are in five of the 139 active condo projects – meaning the phenomena is not Toronto-wide.
It’s good sign, and good news for brokers in the area – with one hoping lenders will take note.
“In the last five years, lenders have taken a conservative approach on the conventional side for condos,” John Panagakos, a broker with Dominion Lending Centres
Home Financial, told MortgageBrokerNews.ca. “Hopefully this report may help them to loosen up a bit.”
Panagakos says most lenders on the conventional side have only gone to 75% LTV for condos over the past five years.
“What’s gone on in the last five years in the condo market? Prices have stabilized,” Panagakos said.