"Canada's housing agency says the weakening condo market in the Toronto region has some parallels to the crash of the early 1990s, but several factors mean the current downturn will likely be less severe. Canada Mortgage and Housing Corporation says in the new report that a more diverse and stable economy, stricter lending rules, and an underlying shortage of homes in the Greater Toronto Area will all help soften the effects of the market pullback."
"The report says GTA condo prices are declining at similar rates to the early '90s, but that it expects prices to start gaining within a few quarters, compared with around seven years of declines in the 1990s. A shortage of housing in the current market is a big factor, compared with a period of speculative overbuilding in the last major downturn. The mortgage stress test is also softening the effects and helping keep lower levels of mortgage delinquency, while banks also now require a higher threshold of condos to be pre-sold before construction can begin."
Canada Mortgage and Housing Corporation identifies parallels between the current Toronto condo pullback and the early 1990s crash but expects a milder outcome. A more diverse and stable economy, stricter lending rules including the mortgage stress test, and higher pre-sale requirements for new construction reduce downside risk. An underlying housing shortage in the Greater Toronto Area contrasts with the speculative overbuilding that worsened the 1990s decline. Condo prices are falling at similar rates to the early 1990s but are expected to recover within a few quarters. Sharply lower condo starts mean few units are slated after 2026, supporting a more balanced market and lower mortgage delinquencies.
Read at www.cbc.ca
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