Well he didn’t phrase it quite like that, but that’s the gist of Ben Myers’ new article in the New Condo Guide.

 

Mr. Myers, the editor and executive VP of the market research firm, Urbanation, writes that he gets asked whether Toronto is in the midst of a condo bubble every day. So in response to all the curious investors, homebuyers, economists, journalists and condo enthuasiasts out there, his article goes about explaining exactly why there is no condo bubble in Toronto.
Rather than re-hash the entire piece, we’ve pulled some of the most salient points and listed them below for you to peruse:

 

  • A bubble is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline
  • The average sold index price in the Toronto CMA new condo market increased 7.4 per cent annually from $462 per square foot to $496 per square foot. Urbanation does not believe this is a “rapid” increase
  • People presume we’re oversupplied since they see cranes everywhere and there are a record 42,573 highrise condo units under construction in the third quarter
  • If the market was oversupplied there would be a rise in the resale sales-to-listings ratio (SLR) and the listings-to-total units ratio (LUR) as sellers would be waiting for scarce buyers
  • 50 per cent SLR and 4.2 per cent average quarterly LUR in 2011 are in line with the 5 year averages

 

But Ben, what about all that investor activity in the Toronto market? How can there be enough people in the city who want to rent these units that investors purchase?
  • According to the new UrbanRental report, the rental market is hot hot hot!
  • Even though a record number of condos were completed in 2011, there is still a shortage of units available for lease
  • The average condo unit took just 18 days to lease in Q3-2011, down from 29 days in Q1-2011

So what is all the fuss about? Maybe some people are misinformed about the likelihood that there’s a condo bubble in Toronto, but surely there’s something going on to fuel these concerns?

According to Myers, we’re seeing “a fundamental shift toward highrise living.”

“Many demographic and cultural changes will continue to tip the scale toward apartment living, including longer commuting times, the desire for Greener living, the fact that people are getting married later in life, the continued appreciation in lowrise housing, lifestyle changes of the baby boomer generation, and the lasting influence of new immigrants more accustomed to apartment living,” he explains.

That’s some sound reasoning from the experts. We’re convinced!

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