ThatРІР‚в„ўs the true signature of a condo construction boom. But in May alone, compared to last year, РІР‚Сљall othersРІР‚Сњ soared 80%! Starts of РІР‚Сљall others,РІР‚Сњ a category that consists largely of condos in Toronto, jumped 29% year-to-date to 13,384 units. In the Toronto Census Metropolitan Area, starts of single-family detached homes edged up 6% year-to-date through May to 3,121 units. Based РІР‚Сљon long-term fundamentals, everything looks like itРІР‚в„ўs in balance and fine.РІР‚Сњ In fact, it РІР‚Сљlooks like a well-behaved Toronto condo market.РІР‚СњР”В¬anada Mortgage and Housing Corporation (CMHC), an entity of the Canadian government, just released the housing starts data. There were РІР‚Сљlots of reasonsРІР‚Сњ to think that the terrible absorption rate would not persist, they said. The gurus at BNN came out swinging to soothe our frayed nerves over a possible condo glut. According to more comprehensive data from Realnet (it includes presales and condos under construction as well as completed condos), the number of unsold new condos has been trending down since the second half of 2014. To be sure, the situation deserves monitoring. Business News Network, in reporting on this spike, pointed out that National Bank senior economist Marc Pinsonneault РІР‚Сљsays there is no cause for concern at this point about a future condo glut driving down prices.РІР‚Сњ Condo construction booms have a nasty tendency to flip suddenly into busts, and then no one can turn off the spigot of new units coming on the market because high-rise condos take years to plan and build, and they just keep coming.Р”В«ut donРІР‚в„ўt worry. Such a spike in unsold units and such a plunge in the absorption rate would normally get folks to fret about oversupply, future pricing pressures, and other industry nightmares. РІР‚СљIt would be premature to think that the absorption rate will stay low, causing persisting accelerated increases in the number of vacant completed condos,РІР‚Сњ the note said to mollify client anxieties.

The report blamed the absorption rate, a measure of condos that have been completed during the month and were either sold or rented. This is what this phenomenon looks like (data from National Bank): The count had edged up in April to hit 2,038 after having already spiked beautifully in March to the highest level since the early 1990s. But the magnitude of this spike far exceeds the monthly ups and downs in recent years, and exceeds even those dizzying spikes in the late 1980s and early 1990s when the Toronto condo market went completely haywire.Р”В«ut it wasnРІР‚в„ўt just one month. ItРІР‚в„ўs an estimate, and estimating new and unsold condos isnРІР‚в„ўt that easy.

So the monthly data is choppy and may not be very reliable. National Bank Financial said in a note to its clients that, based on data from Canada Mortgage and Housing Corp., the number of completed but unsold condos in Toronto spiked in May to 2,837, an all-time record high.

For all types of homes, prices are now 42% higher than at the crazy peak of the prior bubble! And if people canРІР‚в„ўt afford to buy any longer, even with super-low interest rates, well, they can step down to a fancily equipped micro-condo, or more commonly called shoebox condo, where the dining table might fold into a bed.Р”В«ut suddenly we get a nerve-wracking disturbance in this beautiful picture: In May, prices in Toronto rose another 5% from a year ago. It has been motivated by sky-high prices. The high-rise construction boom in Toronto has been evident for a while.

Toronto november 11 2015