Photo Credit: Deborah Baic
In an article titled , Toronto condo resales falter as listings climb in the Globe and Mail last week, Canada’s most populated city, Toronto, a large number of condos are being built. While the price of new condos rise, the number of units rented are slowing down. The resale prices of houses have been flattening out after years of increase while monthly rent rates also decline. With the new supply of units available for rent and recent mortgage insurance rule changes, potential tenants are becoming hesitant to populate new locations. The new mortgage rule changes are causing a clear shift in the balance between sellers and buyers and owners and tenants. The condo market is also experiencing no specific change in price of resale condos. Cost of new condos are rising, however the price of pre-constructed condos in the city have been dropping over the year.
This is an apparent issue because a rapid increase in supply for housing in Toronto means that prospective tenants are unable to adjust quickly enough to the condo market changes. Therefore more and more highly priced condos will be vacant after construction and sunk costs are created when units of value are not being occupied. Such costs include the cost of production, loss in rent, depreciating value of the unit.
Photo link: /The Globe and Mail
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