A new report from CIBC is warning of an excess of rental units in Toronto and Vancouver.
They are basing this outlook on the large number of condos being built in both cities and predict a less than half point rise in vacancy rates, so ‘warning’ sounds a bit strong.
The concern is that increased competition for good renters could drive owners to sell their condos, leading to a further downturn in the condo resales market.
Economists and policy makers have worried that an “increased supply of rental units will flood the market and will lead to a wave of sales by disappointed investors with no bargaining power,” Mr. Tal writes in the report. The Bank of Canada highlighted concerns about the condo market in December when it outlined the key risks to the economy.
“A sharp correction in the condominium market could spread to other segments of the housing market with stretched valuations, as buyers and sellers adjust their expectations of the future path of house prices,” the central bank warned. “Such a correction could also have significant repercussions on the real economy, since the construction sector is an important component of economic activity.”
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