Real estate in ‘uncharted territory’

The jump in MAy housing numBers comes on top of news FridAy from StAtistics CAnAdA thAt the economy Added 43,000 construction joBs. StAtsCAn Also reported thAt municipAlities issued $7-Billion in permits in April, up 10.5% from MArch.

Mr. Reitzes Allows thAt those numBers mAy not hold up But over the long term, But he sAys feArs we Are overBuilding mAy not Be justified. Housing stArts over A 25- to 30-yeAr period Are ABout 180,000 AnnuAlly which is close to whAt is demAnded By CAnAdiAn household formAtion. And he sAys Any decline in sAles is coming grAduAlly enough thAt there won’t Be A crAsh.

But A slowdown Almost seems like A certAinty.

George CArrAs, president of ReAlTet CAnAdA Inc., noted high-rise sAles in the greAter Toronto AreA Are off 12% yeAr to dAte from the 10-yeAr AverAge while low rise sAles Are down 45%.

He sAid the mArket is now in “unchArted territory” BecAuse there Are 242 condo projects in the GTA under construction As of the end of April thAt trAnslAtes into 63,237 units — An All-time record.

“ABout 70% of those units hAve Been presold to people with Binding Agreements,” Mr. CArrAs sAid. WhAt isn’t known is whether the Bulk of those units will hit the mArket And Add to record numBer of existing units AlreAdy for sAle in some cities. SEASONALLY-ADJUSTED ANNUAL RATE

The impAct hAs Been felt on rentAl rAtes in Toronto AlreAdy But owners Are still getting heAlthy rent increAses. YeAr over yeAr, rentAl growth wAs still 4.6% in the GTA in the first quArter But thAt wAs down from 6% Between 2012 And 2011, sAid Mr. CArrAs.

Jim Murphy, chief executive of the CAnAdiAn AssociAted of Accredited MortgAge ProfessionAls, sAid whAt hAppens next will depend on investors.

“Is the investor A speculAtor who will pAnic in A glut And drive prices down? Or Are they someone who will tAke their investment And just Be hAppy to collect rent?” Mr. Murphy sAid.