Drive around any major Canadian city and you're likely to see lots of new condominium buildings under construction. You may wonder who is going to buy and live in those condos – and the answer is, everyone.
In 2006, when the last Census was held, the number of owner-occupied condos in Canada was more than five times greater than it was in 1981, and anyone who has been to a Canadian city recently can see that number is still increasing. Canada Mortgage and Housing Corp. (CMHC) says condos now account for a quarter of all new residential construction.
As of 2006, almost a third of all homeowners in Vancouver were condo dwellers. In B.C., where condominiums are known as strata title, market share is about 20 per cent in Abbotsford, Kelowna and Victoria. Toronto, Calgary and Edmonton are not far behind and now condos are sprouting up in smaller urban centres across the country.
On the resale market, condos represent one in every three houses sold in the Greater Toronto Area, one in four sold in Ottawa and Hamilton-Burlington; and almost one in five in London, Kitchener-Waterloo and Collingwood, Ont., says a report by Re/Max Ontario - Atlantic Canada.
"As one of the few affordable housing options available to first-time buyers, the concept is poised for dramatic growth in years to come," says Michael Polzler, president of Re/Max Ontario - Atlantic Canada. "The lifestyle has also gained a foothold with younger, hipper audiences, as the definition of homeownership evolves with the changing demographic. Dreams of the small home with a white picket fence are being replaced by the funky loft apartment in close proximity to shops, restaurants and entertainment."
First-time buyers have fuelled Canada's housing market for most the last decade and brought it out of the brief recession in 2008. While they are still very important for the health of the real estate market, changing demographics and a more stable economy are shifting the market dominance away from first-timers.
"This will mark the first year that the housing market will not be dominated by younger people," says Shaun Hildebrand, senior housing analyst with CMHC. "In the Greater Toronto Area, there are 600,000 households in the 45-54 age group. They could represent about a third of all housing sales in the GTA."
And increasingly, those 45 and over are choosing condominiums when buying a home. CMHC says that 57 per cent of condo owners were aged 50 or over in 2006. In the Toronto area in 2009, 23 per cent of buyers in the 45-54 age group chose a condo; 28 per cent aged 55-64 went that route; and 40 per cent of buyers aged 65 and over moved into a condominium. Hildebrand says that on average, 75 per cent of units catering to "empty nesters" are presold.
The bottom line for condo developers is that "empty nesters will pick up the slack for the fewer number of first-time buyers," says Hildebrand.
Driving around Toronto, it's hard to imagine where the buyers will come from for all the new buildings. "Over the last two years, we've had an average of 35,000 units under construction," says Hildebrand, but CMHC doesn't think there will be an oversupply. All the buildings under construction are almost completely presold in Toronto – a requirement from lenders before funding is provided.
In downtown Toronto and Vancouver, Asian and Middle Eastern investors buy up many of the new condos as investments.
"Unlike 1989, when a flood of new condominium listings wrecked havoc on the market, these purchasers are in for the long haul," says Polzler. "Leverage is not a factor, with most paying cash for their units. If they can't sell their apartments, they're more prepared to rent them out." Hildebrand says that of the 20,000 condos registered in Toronto in the last year or so, about a third of them have been listed for sale. But demand for those units has been strong and while sales have slowed, prices have held.
Luxury condos – priced at more than $1 million in Toronto – are up by 49 per cent year-over-year, reports Re/Max. Condos priced at more than $750,000 in Ottawa have seen sales increase by about 72 per cent compared to last year.
CMHC says that Canadians are not giving up on homeownership until after they reach the age of 75. With owners of all ages choosing the condominium lifestyle, expect to see a lot more of those building cranes in urban areas during the next several decades.