Bank of Canada warns of risk of ‘abrupt correction’ in Toronto condo market in 12-30 months
The number of unsold units in Toronto’s high-rise projects in the pre-construction and construction phases hasn’t budged since December, the Bank of Canada said in a report released today. If those condo apartments are still without an owner when the buildings are completed 12 to 30 months from now, the BoC warned, “the supply-demand discrepancy would become more apparent, increasing the risk of an abrupt correction in prices and residential construction activity.”
Dipping condo prices, the bank continue, could trigger a market-wide reaction, the BoC said in its semi-annual review of risks to Canada’s financial system: “Such a correction would reduce household net worth, confidence and consumption spending, with negative spillovers to income and employment.” This, in turn, might threaten the ability of some borrowers to repay their loans, leading banks to tighten credit conditions. “This chain of events,” the bank concluded, “could then feed back into the housing market, causing the drop in house prices to overshoot.”
“Any correction in condominium prices could spread to other segments of the housing market as buyers and sellers adjust their expectations.”
http://business.financialpost.com/2...canadian-economy-at-risk-boc/?__lsa=0ac3-9b76
The number of unsold units in Toronto’s high-rise projects in the pre-construction and construction phases hasn’t budged since December, the Bank of Canada said in a report released today. If those condo apartments are still without an owner when the buildings are completed 12 to 30 months from now, the BoC warned, “the supply-demand discrepancy would become more apparent, increasing the risk of an abrupt correction in prices and residential construction activity.”
Dipping condo prices, the bank continue, could trigger a market-wide reaction, the BoC said in its semi-annual review of risks to Canada’s financial system: “Such a correction would reduce household net worth, confidence and consumption spending, with negative spillovers to income and employment.” This, in turn, might threaten the ability of some borrowers to repay their loans, leading banks to tighten credit conditions. “This chain of events,” the bank concluded, “could then feed back into the housing market, causing the drop in house prices to overshoot.”
“Any correction in condominium prices could spread to other segments of the housing market as buyers and sellers adjust their expectations.”
http://business.financialpost.com/2...canadian-economy-at-risk-boc/?__lsa=0ac3-9b76
