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A major real estate developer is brushing off fears of a bubble in Toronto’s red-hot condo market.
“My prediction, and I’ve been pretty accurate to date, is we are going to have a 30-to-40 per cent increase in values of the condo market in downtown Toronto over the next three to four years,” Barry Fenton, CEO of Lanterra Developments, told BNN in an interview on Thursday. He later clarified he expects that price growth to occur over the next three years, not four.
According to data released by the Toronto Real Estate Board on Thursday, the average selling price of a condominium in the City of Toronto (specifically within the 416 area code) was $415,316 during the month of November. That figure represents an increase of 5.4 percent from the same month in 2014.
If Fenton – who leads the fourth-largest condo developer in the Greater Toronto Area – is proven correct, the average selling price of a Toronto condo will surpass $580,000 by the end of 2018. The prediction stands in direct contrast to widely held expectations of a price correction hitting the Canadian housing market in general, and the Toronto condo market specifically.
An unprecedented 80,000 condo units are under development in Toronto, according to an estimate from ratings agency Fitch from earlier this year, representing an increase of roughly 50 per cent over the past four years. In August, the Canada Mortgage and Housing Corporation – the national housing agency – said Toronto was facing a “high risk” of correction due to overbuilding.
The growing chorus of experts raising red flags about hot Toronto condo prices extends to prominent global groups. In early November, the Organisation for Economic Co-Operation and Development said Toronto in particular was at risk of a “sharp” housing market correction.
Fenton freely acknowledges his view is “contrarian.” He believes despite the record number of condo units under development throughout Toronto that inventory will start to run out in a matter of months as developers struggle to find new building sites, meaning supply will soon be outpaced by steady demand.
“There is probably something like five or six months left of inventory and that will be absorbed very, very quickly,” Fenton said, noting as an example a $330-million bid he placed for a prime piece of land on the northeast corner of the Yonge and Bloor intersection. “I got outbid by $30-million by an unconditional offer [and] that just tells me the market is, from an acquisition standpoint, very very strong and it is going to affect the end-purchaser’s ability to buy, or have more selection of inventory to buy.”
“It is not the flavour of the month or flavour of the year,” Fenton said, “For the past 10 years the market has been fantastic and it is only going to continue to grow.”