The Miami condo market began raising worries again late last year as sales, mainly to foreign buyers from Canada, Russia, China and South America, started to slow. Now the worries have escalated, and the news stories are full of headline-grabbing words like “bloodbath” and “bust.” It seems, according to the Wall Street Journal, that developers are cancelling projects, cutting prices and offering lavish incentives like private jet access to try to boost sales. Some are reported to be accepting the Canadian dollar at par.

This, the paper says, is an “ominous echo” of the housing crash of 2008. In the run-up to that crash, a very favourable combination of easy financing and rising prices led developers to build more than 20,000 condos in downtown Miami between 2004 and 2008. Many of them were not sold and sat empty for years, the WSJ says.

By consensus, the Miami condo market has “peaked,” and sales have slowed considerably. One condo developer is said to be selling twenty units a week in Miami; this time last year he was selling 100 a week.

What has happened in Miami? Foreign investors have pulled back, including Canadians. Economic factors like low oil prices, stock market volatility, currency devaluations in South America, where the Brazilian economy is said to be barely alive, a strong US dollar, a low Canadian dollar, and an oversupply of high-end condos have come together to bring the market down. Home sales, including condos, started to slide in Miami in the summer of 2015 and the slide continues. The number of active condo projects has dropped by 42%, reported the WSJ. The drop in the number of Canadian buyers in Miami has been steep, from 32% of all foreign buyers in 2014 to 11% last year.

The underlying force for housing demand is household formation. If your population aged 20–44 is growing, you have it. If it’s not, home price inflation is not sustainable.

Does any of this have any bearing on the Toronto condo market? Not really. Most high end Miami condos, 80% according to a South Florida real estate paper, are bought by foreigners, and most of the condos built there are in the luxury category. That isn’t the case in Toronto.

Canada’s banks have been insisting for years that the condo markets in Toronto and Vancouver are supported by the cities’ demographics. Most recently, the chief economist of the National Bank, Stefane Marion, argued that Canada’s housing market “alarmists” fail to mention that the working age population in Toronto and Vancouver is growing 70% faster than the national average. Employment rose 5.5% Toronto in 2015 compared to a national average of 0.9%. Said Marion, “The underlying force for housing demand is household formation. If your population aged 20–44 is growing, you have it. If it’s not, home price inflation is not sustainable.”

While the price of a single-family home in Toronto, now more than $1 million, is beyond the reach of the average buyer, condos are still quite affordable. The National Bank compared Toronto and Vancouver condo prices to other major cities, including San Francisco, London, Beijing and Hong Kong, showing that buyers in the Canadian cities are in fact much less financially “stressed.”

The shift from single-family homes to condo living is a global trend, according to Marion, reflecting the desire by more people to live in cities.

No Comparison Between Miami Condo Market Slump & Toronto, Vancouver by Josephine Nolan | Condo.ca