In March, several hundred Toronto residents braved the cold to line up before the opening of the sales office of a new condo project. Certified checks in hand, they wanted to make sure they got their choice within Aura, a proposed 75-story residential tower scheduled to go up downtown.
This isn't the first time condo sales debuts have drawn large crowds. In November 2007, speculative buyers waited patiently beside heat lamps to place deposits on another 80-story slab. Despite a last-minute price hike – apartments advertised for $2 million catapulted to $8 million – sales remained heavy.
Prices of real estate in Toronto have risen about 5 to 6 percent a year for the past several years, according to the Toronto Real Estate Board. The average condo now sells for $394,000 Canadian (US $390,446).
In 2008, 21,000 condo units are expected to hit the market and an additional 35,000 units are under development, according to Urbanation, a firm that tracks condo development in Toronto. The city is second only to the New York City region, the epicenter of condo building in North America.
But given how closely linked Toronto's economy is to trade with the US, some officials question how long the city's housing market can shrug off the effects of a downturn south of the border.
"People here have a sense that Toronto's economy is decoupled from the American economy and that just doesn't make any sense," says Garth Turner, a federal parliamentarian from suburban Toronto and the author of "Greater Fool: The Troubled Future of Real Estate."
Other worries about the health of Toronto's economy persist. With the Canadian dollar having strengthened enough to trade virtually at par with the US dollar, the region's manufacturing base has been losing out to companies in Asia. Money spent on Hollywood productions, a staple for the city, fell in 2007, enabling Boston and Detroit to vie as the new Toronto within film circles.
In March, the Toronto Dominion Bank revised its earlier estimate of 2.8 percent growth to a mere 0.5 percent.
Yet this gloominess hasn't seriously dented the city's real estate market. Two key differences in Canadian mortgages appear to be at work – fewer subprime loans and different tax rules.
While several of Canada's big five banks suffered losses stemming from investments in subprime assets, Canadian home buyers have largely steered clear. Only about 5 percent of mortgages in Toronto were subprime.
Then, notes William Strange, a professor of real estate at the University of Toronto's Rotman School of Business, "Canadians can't deduct interest on their mortgages from their income tax like homeowners in the States can, [so] people here tend to pay off their mortgages faster."
The condo boom has also been driven by a set of 2006 new laws aimed at containing sprawl initiated by Ontario's Liberal government.
"There's not much demand for single-family homes anymore," says Jim Ritchie, vice president of marketing of Tridel, one of the city's most active developers. "By creating laws to limit sprawl, the Liberals created a whole new industry of urban infill."
But with up to 40 percent of new condo units in Toronto being bought by speculative investors rather than homeowners, the conditions are in place for a realestate bubble to form, analysts say. If prices decline and investors abandon their deposits, that could send the market tumbling.
"When it looks like prices might start to fall, this market will turn downwards on a dime," says Mr. Turner.
Still, other observers remain cautiously upbeat.
"The thing that marks the boom in Toronto is that unlike New York City or Miami at its height, prices here are still really affordable," says Jane Renwick, editor of Urbanation. "Still, there's a sense that the city's real estate market is now in the eighth year of a five-year cycle."