Quote:
Originally Posted by Jelly Roll
This is also a reason to be skeptical why he would say we are overbuilding rentals yet in the same breath comment about the lack of supply in the condo market.
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This is a legitimate point.
Rentals are purely a spec market. It's common to overbuild. That's often defined as going a point or two over the 5% equilibrium, which would also cause rents to stagnate. It's also common for some analysts and developers to predict overbuilding while others say the market is gangbusters, and keep proposing new projects and breaking ground on others.
Condos lack supply in a lot of markets. The reason few are getting built isn't that there's oversupply...it's that most condos need presales to get financing, and neither buyers nor lenders trust the presale model. Further, the last round of condos filled up in part because a lot of buildings lowered prices and others converted to rentals, not because the market's fundamentals are strong. Groundbreakings will only happen (in any given city) when prices have risen enough to give buyers a sense that pre-buying is a good bet and might save them money, which they'll do only after prices have already risen substantially (generally not being smart about market timing). The exception is developers with better financial depth who can build without presales of course, building at today's prices while selling in a year or two after prices are much higher.
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