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Condos Are A Lofty Concern
While American home building and sales have cratered and prices have dipped 3.2% on the year, Canadian resales rose nearly 10% in July to a new record and average prices jumped 12.6 per-cent to a record $311,495.
Toronto high-rise sales, meanwhile, are in their second year of 24% increases year-to-date. The luxury hotel-condo -- usually commanding the top floors of some architectural jewel and bearing a marquee name like Ritz or Four Seasons -- is the latest boom's must-have.
"It is now common to see 2,000-to 2,500-square-foot condos selling for $2-million or more with property taxes and condo fees to match," Sherry Cooper, chief economist at BMO Capital Markets, said in a recent note. "Per square foot, condo prices are now higher than single-family home prices of similar quality and location."
At the Four Seasons hotel-condo in Yorkville for example, a 2,500-square foot condo sells for more than $4-million; a 3,900-square-foot penthouse has a $7.4-million price tag.
Although the prices may not be quite so lofty, they are racing across the country, too, with Saskatoon joining Calgary as the latest hot spot.
Analysts are at pains to point out how the Canadian market is in much better health than the United States.
The current subprime default rate in Canada is less than 3% compared with 13% and growing for the United States," Warren Lovely, economist at CIBC World Markets said in recent note. And there isn't much subprime debt in Canada anyway. It accounted for barely 5% of mortgage originations during 2005-06, well below the 20%-plus share in the United States.
As well, Canadians have taken out fewer mortgages with teaser or adjustable rates and they have traditionally relied less on home lines of credit to fuel consumption.
Builders and lenders in Toronto, burnt by the 1990 real estate bust, are smarter too.
"There's a healthy amount of discipline that has been inserted into the Canadian system that was a direct result of the problems of '89, '90, '91," said George Carras, vice-president at RealNet Canada Inc. Typically a project is 60% to 70% sold before a shovel breaks ground. Deposits are also quite significant and required at various milestones over the course of construction.
See atricle by Jacqueline Thorpe in the Financial Post »
September 4, 2007 in Canadian Market Forecast | Permalink
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