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Building boom continues in Richmond's downtown core.

A new Toronto-Dominion report suggests Vancouver area home prices could drop 15 per cent in two to three years despite a residential building boom that continues in Richmond.

Richmond City Hall issued 132 building permits worth $143.5 million in May—the biggest month since developers set a record in October 2010 with $390.3 million in permits while they raced to beat a major hike in development cost charges.

Construction of Quintet—a five-tower residential project that includes a community centre and Trinity Western University campus—led the way with three towers valued at $84.5 million. The developer, Canada Sunrise Developments (Richmond) Ltd., also took out a permit to build the community centre with a construction value of $14 million.

On Monday TD Bank warned that real estate in Vancouver and Toronto is generally overpriced. Change is expected to be gradual, and not likely to come this year, unless there’s a major outside shock to the economy, said economists Derek Burleton and Leslie Preston in their report.

TD is calling for a price correction in the two Canadian cities within three years.

“This correction is likely to be reasonably gradual as neither market in our view is showing bubble-like symptoms similar to the U.S. market prior to its massive 30 per cent adjustment,” the economists said.

A growing supply of condominiums will be a contributing factor, they said. But the more significant catalyst will likely be demand.

“In particular, the powerful tailwinds that have driven demand in recent years—including low interest rates and households’ desire to take on additional credit—are expected to become decidedly less supportive.”

While construction of condominiums continues at a brisk pace near the Richmond Olympic Oval and along No. 3 Road, developers are also continuing their concentration on the redeveloping Alexandra area of West Cambie.

Last month Esperanza Homes Ltd. secured a permit to build a $15.7-million apartment building at 9333 Tomicki Ave. Another apartment project, at 9388 Odlin Rd., is being built by Centreville Construction Ltd. and Townline Homes Inc. and is valued at $12.2 million, according to the city.

Richmond’s City Centre area plan calls for a tripling of the downtown population to 120,000 within 25 years.

In April, Mayor Malcolm Brodie told the Richmond Chamber of Commerce that developers have $4 billion worth of projects now under construction or in the planning process.

“It does illustrate the significant investment potential we’re seeing in the city of Richmond right now,” he said.

Construction of single-family homes also continues to be hot in Richmond. Older homes are being demolished to make way for new homes, whose construction value totalled $10 million in May.

Throughout Metro Vancouver, building permit values are up 11 per cent in the first four months this year compared to 2011, according to the Vancouver Regional Construction Association.

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