Ontario’s condominium prices may decline as much as 10 percent over the next few years as a record number of units under construction saturate the market, according to Fitch Ratings Inc.
At least 80,000 new multifamily units are being built in Canada’s most populous province, with the majority in Toronto, according to a Fitch report Wednesday. Once they hit the market, the units may drive down prices in what Fitch said would be a soft landing.
“Even though we’re starting to see a downtrend in starts, it’s not enough given how many units are out there waiting to come online,” Stefan Hilts, director at the service, said by phone. “The boom that started in mid to late 2012 is just continuing -- those units aren’t yet on the market.”
Toronto’s condominium developers, who have been scaling back on new projects for the last few years, already have 100 towers in Canada’s financial capital under way. Flatlining prices may drop as much as 10 percent, Fitch said.
Builders brought 1,436 units to market in the first quarter, a 58 percent drop from a year earlier as units sold fell 10 percent to 4,432, according to a report by researcher Urbanation Inc. Price gains have slowed, with the average condo unit up 3 percent to C$450,133 ($376,396) in March from a year earlier. Builders may slow the pace of construction, delaying occupancies, to keep prices from dropping, Hilts said.
Fitch estimates the Ontario housing market is 25 percent overvalued. Prices won’t decline by that much, Hilts said, because one of the potential catalysts for a correction -- Canadians defaulting on mortgages -- is unlikely with relatively safe loans.
Several large-scale developments are in the works in Toronto, including the $560 million City of the Arts complex by the city’s waterfront and an 80-story downtown tower proposed by Mizrahi Developments.