Condo Demand Underestimated-Prices Edging Up

Posted by: Elise Stern, Created date: January 4, 2015

A recent report from CIBC World Markets reveals that official population projections may be underestimating population growth by almost 100,000 people, which has big implications on housing demand.
The report found that new immigrants account for about 70 per cent of the increase in the Canadian population. Many of them settle in the GTA. Half of them are in the “prime-aged, 25 to 44-year-old cohort [which] represent the economy’s engine as those who have the highest employment levels and those most likely to start families.” They are also prime home buyers.

The authors, Banjamin Tal and Nick Exarhos, discovered that the number of non-permanent Canadian residents - including students, temporary workers, and humanitarian refugees - increased by 22,000 to 774,000 in 2013. “Those are big numbers,” say the authors. “When it comes to measuring household formation in Canada and its implication for the appropriate level of homebuilding, we systematically understate the number of those non-permanent residents.”

More households translates into more condo buyers and more renters for condo investors. During the month of November 2014, the average condo apartment in the City of Toronto sold for $394,225, an increase of 2.0 per cent compared to the same time in 2013. In the 905 regions, the average condo apartment sold for $310,220, an increase of 11.8 per cent compared to a year ago.

Furthermore, CMHC predicts that demand for condo apartments from both baby boomers and millennials will continue to increase during the next two years.  

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