Toronto’s boom in condo building is on the wane, with the number of new units started in the third quarter at a 4 ½ year low, according to a report from BMO.

BMO economist Robert Kavcic said Toronto condo starts are at 16,500 on an annualized basis in the July to September period.

That’s down from their peak of 40,000 a year two years ago.

“Is the bulk of Toronto condo building behind us?” Kavcic said in a research report. “It certainly looks that way.”

The federal government tightened mortgage rules in 2012 to force buyers to have a bigger downpayment and an amortization period of less than 25 years. Those changes were made in an attempt to cool hot urban housing markets across Canada.

A Statistics Canada report on municipal building permits for August shows a sharp downturn in building of multiple unit dwellings throughout Ontario.

Kavcic notes there are still 56,000 units under construction in Toronto, meaning new supply will flow into the resale market in the year ahead.

Condo rental listings fall

Condo research firm Urbanation also noted the trend, pointing to a dip in rental listings in the third quarter.

“Rental activity is heading towards a more sustainable pace as demand levels-out following extremely high rates of growth in previous quarters,” Shaun Hildebrand, Urbanation’s senior vice president, said in a news release.

Sales slumped through the first half of 2013, he said, mainly because of the new rules and high prices.

But he expects condo projects will pick up again in 18 months or so, as many projects now on the books are nearing the 70 per cent sold mark they need to get bank financing.

Kavcic notes the tight supply of single-family housing in the city, saying it is "running below demographic demand," a trend that can push up the costs of detached homes.

Statistics Canada reported Thursday that new home prices in Toronto, Hamilton and Oshawa, Ont. were up 0.3 per cent on the month, the biggest hike this year.