Noted: RBC Says Toronto Condos not a Bubble

Toronto Condominium Market Not In Bubble, Royal Bank Says

The country’s largest city needs more condos because legislation aimed at restricting urban sprawl has cut the supply of new single-family dwellings, according to a report by Royal Bank Senior Economist Robert Hogue. The record 44,100 condos and apartments that the government’s housing agency said were under construction in May compares with the 38,000 new households being formed in the city each year, Hogue said.

How many of these households want to start a family, and how many 3 bedroom condos are there to accommodate them? Kind of a mismatch there, eh?

Clearly families should just buckle down, cut costs and buy two. That'd only be a $million. Totally affordable.

“The strong presence of investors in the condo market raises the risk of a mismatch among the types of units supplied and ultimately demanded for occupancy,” Hogue said in the report. “At this point, we do not equate this risk with a bubble.”

I guess without a definition of bubble, why not?

Original Report at RBC

For comparison, these were the new highrise condo sales (according to: bildgta.ca) for all of GTA
2003: 11,871
2004: 13,750
2005: 17,693
2006: 17,617

Household formation graph from RBC

Based on RBC's own graph of household formation, the difference between the rate of formation in 2001 to 2006 and 2006 to 2011 is about a 14% increase. How does the growth now rather than then justify a more than doubling (possibly a trebling) of condo completions?

Meanwhile prices across Canada continue to rise according to housepriceindex.ca. I continue to be amazed that despite obvious examples right next door, a bubble simply has to run its course, no matter what. It must run out of participants, which means it will always cause maximum collateral damage.