Toronto’s building on up
Jenny Yuen – Toronto Sun
Toronto looks like a city of cranes from 42 storeys above on University Ave.
The south-facing view from the penthouse condo at University and Dundas Street West shows panoramic vistas of the skyline stretching to the lake.
And speckled around these landmarks are a few dozen construction cranes — the indication the city is growing and continues to build.
“It is Toronto’s new normal,” said Bryan Tuckey, CEO of the Building Industry and Land Development Association (BILD). “When you see what’s happening in the City of Toronto, it’s not a condominium bubble — it’s a very significant, public policy-driven shift to higher density.”
Comment: Exactly. While not entirely policy-driven (it is not just green belt legislation doing this), people are changing where they want to live – and what they can afford. And every crane you see mean that building is at least 70-80% sold. How can there be a bubble when they are all bought and paid for? And prices aren’t skyrocketing? How is that a bubble?
There are 154 building cranes in the air right now in Toronto. That translates to 46,362 units being developed, mainly in highrises, and 89% of those units are sold, according to BILD.
Comment: There you go. They are not all going to hit the market next year, like TD says. It will take 3 years for those to be finished. And by the time the condo corporation registers, they will be 96.5% sold.
Toronto may be destined to be a land of glass towers, but that doesn’t mean people aren’t willing to throw stones at them.
Condo development has become a contentious issue in recent years between those who say they are creating adequate housing for the future and those who believe too many projects at once is over-saturation.
Comment: How is it over-saturated? If people are buying them and wanting to live where they are built, then that is the right saturation. When stores and restaurants and business follow the residents, that is exactly the way it should work. Those who cry overbuilding or condo bubble obviously have no grasp whatsoever on what is happening and why it is happening.
BILD claims the number of developments is slated to grow steadily in the next 10 years, and future construction follows the requirements for Ontario’s Places to Grow Act, the provincial plan for growth and densification in existing communities.
Comment: I don’t think we will see much more happening concurrently, there just aren’t enough workers or materials. The fundamental flaw with TD’s argument for completions to jump to from 16,000 per year to 35,000 per year.
In the last five years, about 60% of new homes sold have been highrises. New home construction in 2013 created more than 207,400 jobs in the GTA and the City of Toronto generated $11.1 billion in new home construction.
Comment: And every year it will tip more and more to condos over houses. Due to land use policy, demographics, pricing, etc.
For builders, it’s the challenge of providing housing for 100,000 people coming to the region each year from immigration, migration from other parts of Canada, and people starting families.
According to the builders association, the development industry must build between 35,000 to 40,000 new homes each year to keep up with demand.
Comment: And they only built 28,406 last year. This is why there is no overbuilding, we are still 7,000-12,000 housing units short of demand. If we were building 50,000 homes every year, sure, that would be too many. But we are a long way from that.
“When you look at what Toronto is going to be in 20 or 30 years, Toronto will be the third-largest metropolitan area in North America, with only Los Angeles and New York being larger,” Tuckey said.
Comment: It already is the 3rd largest. Well, 4th largest if you include Mexico City (then LA and NYC).
But analyst Don Campbell, of the Real Estate Investment Network, warned condo developers and the province to closely monitor the city’s long-term demand for the next decade.
Comment: There is no need for government to monitor anything. If people don’t buy, housing doesn’t get built. Simple as that. If demand slows, then buying slows, then some buildings don’t get built.
“The trend that we see is the size of the units get smaller, therefore trying to keep the market in an ‘affordable level.’ Our studies are really focused on who’s next rather than who’s now,” Campbell said.
“Developers are developing what is required right now — in essence, a condo factory. The demand right here right now is size for sheer affordability. Take that out 10 years from now, you’re going to see a lot of one-bedroom ghettos. That may be a harsh term, but it’s painting a picture,” he said.
“All these one-bedroom units that we have now are going to become quite useless to Generation Y (families) 10 years from now (who need more space).”
Comment: But they will appeal to the new generation, singles who need affordable homes. And then they will get married and make babies and want larger units. And so on…
While buying a condo unit is still approximately $230,000 cheaper than purchasing a single-family house, prices are rising.
Condo prices have increased by 6.4% from last year in the GTA and even higher in Toronto at 7.6%, according to the Toronto Real Estate Board (TREB).
Compare that with detached homes price increases of 8.3% in the GTA and 9.2% in Toronto.
“The condo market has been quite resilient,” said Jason Mercer, TREB senior manager of market analysis.
“We saw record occupancies last year of new condominium apartments, and over the last few years, we saw a lot of construction and a lot of completion that has led to a lot of supply in the marketplace for condos. Yet, we’ve seen enough demand relative to that supply to continue to see upward pressure on pricing,” Mercer said.
Comment: No we didn’t. The record was a few years back, with 18,000+ completions. Last year was 16,000 and some.
But as more condo towers pop up, so do concerns of residents who are impacted by what they call overdevelopment.
The Toronto Entertainment District Residents Association (TEDRA) notes a large number of condos are slated for their community. The group’s concern is that when they attend meetings and ask for a vision from condo developers, they don’t receive a satisfactory answer.
“As you see already, we have an enormous amount of traffic congestion and when we go to these development meetings, we always ask about infrastructure and we never get an answer. But they keep approving them,” TEDRA executive director Mike Yen said. “If we don’t have an answer, why do they keep approving them?”
Comment: Yes. Traffic and infrastructure are MAJOR issues. From water to electricity to parking and shopping. City planners need to do a MUCH better job of providing basic services for the 1,000s of new residents that come with every new condo.
“It’s an area where condo developers advertise to come here because it’s eclectic, fun, vibrant — but if they’re tearing all that down, what do we have left? One of our main fights is saving restaurant row (on King Street West). We’re losing heritage buildings and businesses that are vibrant and successful,” Yen said.
“No one wants to live in a forest of condos with no green space and nothing to do.”
Comment: Well no, most condos are built on empty lots. They don’t tear down stores to build condos generally. But every condo needs green space, stores, etc.
BILD contends the public and the industry need to clearly identify where they want shovels in the ground “so it fits in the community in a sensitive way.”
Builders recognize that areas close to transit are attractive, such as North York Centre, along the waterfront, Liberty Village, downtown and Etobicoke. BILD also examines other cities, such as Calgary and Copenhagen, Denmark, as examples of how they can build more effectively.
Tuckey said he believes there should be a mix of housing options and that the condo market is self-regulating. If units are not sold, they’re not built.
Comment: At least one person gets it!
“I think we still should be able to have housing choice for the different phases of people’s lifestyles,” he said. “At this juncture, there just isn’t enough supply of ground-related to meet that market, so people are forced up longer they’d like, out — and we see people moving farther from the city to find places to live, or they move back in with their parents.”
Comment: Nothing you can do about it, there is simply no room to build more freehold houses. And if it does get built, it is quite expensive.
Ute Lehrer, a York University environmental studies associate professor who has studied condo development in the GTA for 15 years, said there needs to be an overall vision for the city when it comes to condo planning.
Comment: Oh god yes. Look at Chicago, for example, where the city had a hand in the planning.
“It’s not the question of numbers, it’s the question of quality,” she said. “We talk too much about overbuilding in Toronto, but we don’t talk about the form of the building. It’s lacking interest from the builders’ side to build for the long-run. They are thought through for 20 or 30 years, but 10 years in they already start to leak. They need to think about quality over a cheap deal.”
BILD maintains building up is simply an inevitable — and a sustainable and beneficial part of Toronto’s future.
“The residents of Ontario and the GTA spoke very clearly 10 years ago that they wanted to stop the outward expansion — what they perceived as sprawl — of the region,” Tuckey said.
“Change is difficult for all involved. This is a significant change that public policy has decided to implement in Ontario. (Builders) are on the front lines implementing this change.”
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Contact Laurin Jeffrey for more information – 416-388-1960
Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.
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