Canadian condominium construction is strong, but not necessarily excessive, since new units are filling a gap by creating much needed rental stock, says a report by the Royal Bank of Canada.
“Concerns have been raised about the growing number of investors fuelling the growth in condo sales in recent years,” said Robert Hogue, a senior economist with RBC in a report Thursday. “We believe that this phenomenon must be looked at in the context of relatively tight rental market conditions in large Canadian cities, from which investors aim to benefit.”
He says condominium units fill a need in the rental market because few apartment buildings have been initiated in the last two decades.
RBC estimates about 20 per cent of all condominiums are rented. In recent years, that figure could be higher, since market research firm Urbanation Inc. estimates that 45 to 60 per cent of all new units are being purchased by investors. Some of those investors will rent their property out, while others will sell the unit on closing.
Vacancy rates in the Toronto market dropped sharply to 1.6 per cent in April compared with 2.7 per cent a year earlier, according to the Canada Mortgage and Housing Corporation.
A 1.6 per cent vacancy rate means that only 16 of every 1000 apartments remain vacant. The CMHC said stronger immigration and declining affordability for first-time buyers have made some opt for rental accommodation.
Condominium sales have been on a tear in the Toronto area, representing the largest market in North America. full article -->
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