Wednesday, February 11, 2015

Micro condos will face their first real test in Canada this year, experts say...CTV News

Alexandra Posadzki, The Canadian Press
Published Monday, February 9, 2015 10:57AM EST

TORONTO -- The appeal of so-called shoebox condos -- no larger than the size of two average living rooms -- will face its first real test in Canada this year, with an influx of the compact homes set to hit the country's largest real estate market.

Although developers are pitching micro condos as an affordable entry point into the market, brokers say it's mostly investors -- catering to a demographic of young professionals increasingly flocking to the downtown core -- that's driving demand.

There are nearly 3,000 micro condo units under construction in Toronto that are slated to be completed this year, Hildebrand says. If investors snatch them up, that could spur developers to build more of the micro units to satisfy demand from investors.

The challenge comes in securing a mortgage for the micro units. Brokers say Canada's five biggest banks are hesitant to provide financing for units below a certain minimum square footage, concerned that investors will sell off the properties if the housing market starts to slide.

"If there's a downturn in the housing market, is the lender going to be able to sell and recover the mortgage financing they provided?" said Christopher Molder of Axess Mortgage.

"Because these units under 500 square feet are relatively new, no one's tested the market to see how desirable they are."

The major banks say the size of a property is only one several factors in the decision to offer financing.      
View the entire CTV news report here... 

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