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CMHC says there’s no housing bubble in Toronto

July 22nd, 2016  |  Home

If you’ve been reading the paper or watching the news, you’ve no doubt heard the term “housing bubble” thrown around the media and possibly even your friends when discussing the real estate market. Well apparently there isn’t one.

The Canadian Mortgage & Housing Corp. released a report in which they compared the current condo boom with the condo bubble of the 80s and found that things are different enough today to avoid a repeat of the past. According to Bloomberg the big difference is in the pre-construction sales thresholds developers are hitting before breaking ground on new builds. 79% of condo buildings only started construction after developers sold at least 70% of the units. And of those that started construction before, they were usually small projects or well-known developers, all of which helps mitigate overbuilding.

The market, which relies on a delicate balance of supply and demand has steadily grown in size thanks to a high demand and a supply to match. If everyone stopped buying condos but we didn’t stop building, the market value for condos would plummet and that would be terrible for buyers.

Lenders typically require developers to pre-sell 60% to 80% of a project’s units before approving financing, and in the 80s housing bubble anecdotal evidence suggests thresholds were much lower.

Canadian Real Estate Association numbers put the average price for a condo in Toronto at $352,000 compared to the $647,600 average across all housing types.