Aging population, projected job growth spur Canada’s condo market
Canadian homebuyers looking to capitalize on the condo market should get in as soon as possible and not wait for a market crash that likely isn’t coming, according to a new report from the Conference Board of Canada. The nation’s growing condo industry is expected to hold firm and avoid major calamity emanating from Canada’s recent downturn. Canada’s ageing population and the nation’s projected job growth are the main drivers behind the demand.
Condominiums are reshaping the skyline of major Canadian cities from coast-to-coast. Whether it’s first time homebuyers, retirees looking to downsize or professionals seeking a shorter commute to work, condos are a popular option for Canadian urban-dwellers. Although sales are expected to drop in 2013, largely a reflection of the broader economic downturn, fears over a market crash are unfounded. Now that the US economy is regaining its footing, the spillover effect into Canada will create favourable conditions for the housing market.
According to skeptics, rising interest rates and personal debts are strong disincentives to entering the condo market. Average consumer debt hit an all-time high earlier this year, and now exceeds $27,000. This represents a gain of 6 percent over the previous year, the fastest gain since 2009. At the same time, Finance Minister Jim Flaherty has repeatedly stated the federal government has taken decisive action to avoid a condo bubble, especially during the past 18 months.
One factor the skeptics overlook is how affordable condos remain when compared to detached homes in most Canadian cities. According to a recent report from the Royal Bank of Canada, a two-story home takes an average of 48.4 percent of Canadians’ pre-tax income, whereas a condo takes less than 28 percent.
The Canadian economy is expected to rebound next year in-line with the global economy. The real test for the condo market will be in 2015, according to Benjamin Tal, deputy chief economists to the Canadian Imperial Bank of Commerce. According to Tal, condo prices are already falling, which suggests there might not be enough demand to soak up the supply in a few years.
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