Toronto and vancounver markets 'overheating'

Canada's biggest banks are tightening lending standards for condominium builders at the urging of regulators, requesting higher pre-sales and deposits as policy makers warn the Toronto and Vancouver markets are overheating.

Some banks have been asking construction firms to put more equity into new projects in recent weeks, according to developers. Lenders have also been raising the percentage of condo units that must be pre-sold and are demanding higher deposits as conditions for financing, they said.

"Several of the banks have tightened up" after the Office of the Superintendent of Financial Institutions "told the banks to be a little bit more careful on who they are lending to and how they are lending," said Barry Fenton, chief executive officer of Toronto-based Lanterra Developments, whose condos include WaterParkCity and Ice Condominiums at York Centre.

Policy makers including Finance Minister Jim Flaherty have warned about the risks of record consumer debt and soaring housing prices that some investors say may be inflating a condo bubble in Toronto and Vancouver. Housing prices may drop 15 percent as interest rates rise, crimping economic growth and sending Canadian stocks down 10 percent, said Sadiq Adatia, who manages about $9 billion at Sun Life Global Investments Inc.

While OSFI, Canada's banking regulator, hasn't imposed new formal requirements on real-estate lending specific to geography or property type, it increased supervision of residential lending practices more than a year ago, spokeswoman Leonie Roux said.

Source: Bloomberg