What bubble? RBC says Toronto condo’s market won’t crash

The city’s condo boom may be keeping both Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney up at night, but at least one high-level economist is contradicting both (because when has anyone ever agreed about the real estate market?). Robert Hogue, a senior economist at the Royal Bank of Canada, insists there’s no bubble in Toronto and, while the market will likely see a bit of cooling, there won’t be an epic condo crash. In a report released today, Hogue argues that demand for housing remains strong—after all, there are roughly 38,000 net new households in the Greater Toronto Area each year and they have to move in somewhere. He writes:

Based on market activity to date, the total number of new housing units (condos, single-family homes, and others) completed by builders has not exceeded the GTA’s demographic requirements and is unlikely to do so by any significant magnitude in the next few years.

Contributing to that demand, Hogue writes, is the fact that new construction of single-family housing is hindered by sprawl restrictions. Still, he does think condo prices will eventually fall by about 2 to 7 per cent. He also writes that a bubble could develop if investors all start to buy up the same type of unit, say one-bedroom condos. If there’s growing demand among families (some people certainly think so), that could cause imbalances within the condo market. [Globe and Mail]

(Images: Toronto skyline—Seekdes (Mike in TO); bubble—Rhett Maxwell)