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A slowdown in the condominium market this year could help open the door to home ownership for buyers previously sidelined by soaring real estate prices, according to a study by Genworth Financial Canada and the Conference Board of Canada.
Condo sales activity in three of Canada's eight major markets – Ottawa, Calgary and Edmonton – is expected to drop this year compared with 2007, according to the Metropolitan Condo Outlook Winter 2008 report, released Wednesday.
Condo prices are expected to increase at a more modest rate than previously in all cities in the study except Montreal this year.
“In many cities condominiums are filling a need for relatively affordable housing close to the city core. Since prices for single-detached bungalows, for example, are pushing $500,000 in some Toronto and Calgary neighbourhoods and at least $650,000 in Vancouver, condominiums represent an important first step for many housing market entrants,” the report says.
A slowdown in price growth could finally bring a bit of relief to the country's priciest markets, Vancouver and Victoria, where condos are the only option for many buyers.
Vancouver condo prices have risen by an average of 15.4 per cent annually over the last three years, and are expected to go up by 5.7 per cent in 2008. In Victoria, prices are forecast to rise 3.9 per cent in 2008, compared with an average 14.9 per cent yearly increase in the past three years.
This moderation is expected to continue, with Vancouver's average condo price seen rising 3.5 per cent per year to $389,344 by 2012, and in Victoria by 2.9 per cent annually to $314, 298 over the next four years.
Last year's hottest major markets, Edmonton and Calgary, should experience an even more dramatic slowdown in condo price growth this year, the report says.
Last year, the median price for a resale condo in Edmonton rose by 43.2 per cent to $235,881, compared with the forecast for a 6.4 per cent increase this year. In Calgary, last year's 22.2 per cent price increase is seen slowing to 4.1 per cent this year, bringing the median resale price to $286,896.
Unlike other cities in the study, Toronto's condo market hasn't been driven by purchases made by people 55 and over, the report says.
“Rather, the appeal of Toronto's condominium market has been its relative affordability compared with single-family and semi-detached homes,” the report adds.
Bumpy supply and demand has created big swings in the Toronto market recently, something expected to smooth out by the end of the year.
The median resale price in Toronto is expected to rise by 2.9 per cent in 2008 to $236,351, compared with a 7.6 per cent increase last year.
Fairly large drops in new apartment starts are also expected in five of the report's eight markets. The trend will be led by Victoria, at a decline of 54 per cent, followed by Edmonton, Montreal, Calgary and Vancouver. By contrast, starts are expected to rise by 28 per cent in Toronto, the only market seen posting a significant increase after a 30.6 per cent drop in 2007.
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