Disparate economic conditions, single-family housing prices, building cycles, demographics and government policies are among the factors accounting for significant differences in apartment condominium markets across Canada.
“The population is aging everywhere, and that’s often a spur for apartments and condominiums as empty nesters downsize,” said Conference Board of Canada senior economist Robin Wiebe, who co-authored the “Metropolitan Condo Outlook: Insights Into the Apartment Condominium Market in Eight Large Canadian Metropolitan Areas” report produced in conjunction with private residential mortgage insurer Genworth Canada.
“Single-family homes are unaffordable in some markets, which is pushing people into the multi-family dwelling market, and many cities and provinces have residential intensification mandates so they’re encouraging people to build higher density units.”
Part one of an overview of the report’s findings examines four major eastern Canadian cities. Part two next week will feature the report’s findings on four major western Canadian cities.
Unit sales of existing condos are expected to rise by just 0.6 per cent this year, while a stable economy and good employment growth project sales to climb by 2.5 per cent in 2016. New condo starts are forecast to drop to 1,088 units this year, the lowest level in eight years.
“The developers know that the market is a little bit oversupplied and they’re cutting back,” said Wiebe, who added resale prices “rose by about one per cent last year and we’re forecasting not much growth again this year because listings are going to grow faster than sales, putting downward pressure on prices going forward.”
Lower inventories and spillover demand from a slightly tighter resale market should encourage builders to return to the market and increase starts by 1.7 per cent in 2016.
A weak start to the year will hold growth in unit sales of existing condos to 0.1 per cent.
“Sales have fallen at least three straight years for existing condominium apartments and we’re not forecasting much change this year,” said Wiebe. “Against that backdrop, the average price is going to rise by a relatively modest three per cent.”
However, with bigger gains forecast for the economy over the coming months, demand in the resale market is expected to increase and result in a two per cent rise in unit sales next year.
Montreal has a record-high number of units that are completed and unoccupied.
“They rose 30 per cent last year and are on track to rise just a little more this year,” said Wiebe. “With rising inventories, starts are going to fall this year because the market is oversupplied.”
As inventories start to fall next year, starts are forecast to increase by 2.6 per cent.
“Even though we’re forecasting sales to go up by close to four per cent, that follows three years of falling sales,” said Wiebe. “The condo market has eased in recent years and we’re forecasting more of the same for 2015.”
Resale prices are forecast to remain weak for another year because of an oversupply of new units, and new condo starts are expected to fall below 1,000 units for the first time in six years.
“A number of units remain under construction, so we’re forecasting starts to fall sharply this year compared to last year, and last year saw a pretty substantial drop,” said Wiebe.
Unit sales in Toronto’s resale condo market are forecast to grow by 1.4 per cent this year, and a stable economy and healthy population growth are expected to keep boosting demand from 2016 onward.
“Prices continue to advance but we’re forecasting a modest two per cent increase,” said Wiebe. “All the action in Toronto is in on-the-ground units like semis, row units and single detached homes.”
New condo starts are expected to rise this year and absorptions also started at a fast pace in 2015, helping to keep inventories under control even as completions reach record levels.
“The number of units completed and not absorbed has fallen, but we’re forecasting that to go up this year — but not to a point where it’s going to be a bubble that’s going to burst,” said Wiebe. “These units will eventually be absorbed and we’re looking for fairly strong declines in the number of completed and unoccupied units in the next couple of years.”