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He says that many lenders are “thinking twice” about loaning money to developers, even when they have reached a threshold of 70% of pre-construction sales, the traditional level needed for a construction loan. Mr. Tal says it is second-tier developers being hit by the credit crunch and he’s projecting there will be 18,000 condo completions in the GTA in 2013 and 23,000 completions in 2014.

“The practical implication of such a scenario is potentially large-scale delays in project delivery,” says Mr. Tal, in a report. “[Developers] will get the money but they will have to pay more for it and it will take more time.”

Condominium contracts are already being drawn that allow greater flexibility for when a condo is completed, potentially avoiding penalties typically paid to the consumer when a condo is not ready on schedule.

Mr. Tal doesn’t see a crash coming but he does see rising vacancy rates and less opportunity to pass on rental rates increases. The key for the market will be how leveraged condo investors are.

Mr. Tal says if the majority of investors have 20% down — something he believes to be true — there will not be a mass exodus from the market.

While the condo sector may be under siege, the low-rise single-family home has never been better poised to rise in price. Condos now account for 75% of new construction in the GTA, making the low rise home more of a commodity.

“You could have a correction in the market where everything goes down but I suggest [low rise homes] will go down less than the condo market,” Mr. Tal said.

A report from condo research firm Urbanation Inc. shows sales are falling fast in the Toronto sector with first quarter activity down 55% from a year ago.

“We are in an adjustment period. We are coming off obviously extremely strong [sales levels] for a fairly extended period of time,” said Shaun Hildebrand, vice-president of Urbanation. “This was expected, I’d be more concerned if sales numbers keep growing.”