Fitch Ratings has warned that beneath the unprecedented boom in the Ontario housing market is a large overhang of pending supply that could threaten continued home price growth in the province.
Currently, more than 80,000 new multifamily units are under construction in Ontario, with the vast majority of this concentrated in Toronto. This is a record high and nearly 50 per cent more than four years ago when the condominium construction boom began, according to the rating agency.
Amid this unprecedented increase in large developments, construction timelines are being extended, with completions lagging behind housing starts. With price levels relatively flat over the last six months, the significant boost to supply implied by this construction overhang could present a problem for continued price growth, with the market potentially becoming oversaturated, Fitch said.
Surprisingly, housing starts in Ontario have actually fallen, with the current rate nearly 40 per cent below the 2012 peak. But with 84 per cent of units under construction in larger multi-family buildings with longer building schedules, compared to an average of 51 per cent since 2000, active construction volumes have continued to grow.