Categorized | International

Toronto Real Estate Market May Be the Next Bubble

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While much of the real estate world focuses on China’s property restrictions and the lack of recovery taking place in the United States, Toronto may be quietly forming its own dangerous real estate bubble. Toronto currently has more skyscrapers than any city in North America, including New York City.

 

The city has become a haven for condos, as construction of the residential units continues to grow at an unprecedented pace. Analysts believe that builders are overestimating the amount of demand there is for condos. With the inflated demand figures, the residential real estate market in the city has become overvalued, and due for a correction.

 

In fear that the Toronto market’s bubble may burst, lenders in Canada have opted to raise mortgage rates. The purpose of such an action is similar to what China has done in the past six months. By raising the rates, lenders are attempting to cool off the residential real estate market in order to prevent a major housing crash.

 

Housing prices have increased by fifty-three percent in the last five years. Although the number of defaults has been quite low, there is more than one trillion dollars of debt in outstanding mortgage loans in Toronto.

 

The primary focus of concern in Toronto’s housing market can be found in the city’s condo sector. Investors continue to buy into the condo market due to low borrowing costs. As such, the residential units continue to be built at a startling pace. With more than five years of supply in the works, it is likely that the overflow of condos may cause prices to spiral downward in the next year or two.

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About Nancy Raven

Nancy is the main writer for the International section of the website. Sometimes she also helps Drew out on the Finance/Mortgage section as well.

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