Toronto Condo News:
Date: June 18th 2014
Toronto is a city that is continuing to grow and it seems condos are a permanent part of the housing mix. Currently there are 155 Highrise and skyscraper condo projects under construction in the city. That is by far the most of any city in Canada, by at least a multiple of 4.
Some refer to the current construction as the Great Toronto Condo Boom. Some others refer to it as the Great Toronto Condo Bubble. Whether you are for or against the current condo construction craze, you cannot deny the change all this condo construction is having on Toronto, its culture, its urban form and its skyline.
Part of the reason for the onslaught of construction is a very well placed government policy of fostering higher density development within existing communities. This along with the desire of some residents to forego commuting and instead live closer to where they work.
Another factor in the general condo build up in Toronto is that the supply of land to build single family housing is dwindling and add to that the excessive cost to purchase and you have all the elements required for a massive building and construction boom which is exactly what is happening right now in Toronto's Condo market. Driven by a lack of supply, new home builders are accumulating lots in order to create redevelopment opportunities for new condo Highrise housing. This is most evident in the downtown core where the pricing for land is the highest and the demand for living space is the greatest.
When someone tells you that the the Toronto Condo Bubble/Boom is bound to burst just remind them that the Places to Grow Act of the provincial government has restricted the amount of available space for new home development in the Greater Toronto Area. Looking back you can see that of the housing stock sold over the past five years over 60% of new homes sold in the Toronto Area have been Highrise condo towers.
The Toronto condo market and related construction is responsible for $11.5 billion dollars of development last year, as input to the overall GDP of Toronto. It also was responsible for 210,000 jobs within the city. The development number is projected to rise to $15 billion dollars this year.
The main challenge for builders alongside policy and urban planners is trying to house an estimated 100,000 people that move to the Toronto region every year through immigration, migration and natural increase. There are few rental only new developments in the Toronto Market at current.
So condo development and construction is the only way to build massive housing stock in a relatively short amount of time. This development cushions the housing market from tremendous upward price movement. According to developers they must build between 30,000 to 40,000 units of new housing each year, just to keep pace with demand. If Toronto maintains it rate of growth in 20 to 30 years it will be the third largest urban region in North America behind only New York and Los Angeles.
In order for the condo Highrise market to remain stable long term, developers will need to focus on building bigger units so as to accommodate larger or growing families that want to remain in the downtown core. This is similar to the situation in New York-Manhattan where you find a large collection of 3 and 4 bedroom properties for rent or sale. This is likely the case when Toronto's condo market matures more steadily. One bedroom condo units alone might not be enough to sustain the condo market in the long term.
While condo pricing is relatively cheap compared to buying detached or low rise housing, by about $230,000 dollars. The price of condos has been increasing in recent years at a pace of about 5% a year. So even low priced condos are moving over the $350,000 price point especially in the downtown core of the city of Toronto.
In comparison, the pricing for detached housing has been rising at about 8% per year and a fully detached home in Toronto is nearing almost $1 million dollars in price. This is forcing more people into condo Highrise development and creating a vicious cycle of development. Some have called this development the Toronto Condo Boom.
The demand relative to new supply of condos in the Toronto Market means that there has been some resilience in pricing with a tick of upward pressure.
Some residents in Toronto fear what they call over development which is what condo owners in the Toronto Entertainment district are facing with a rapid pace of development and more condos being built than anywhere else in Toronto. They call it overdevelopment.
The Toronto Entertainment District Residents Association wants to have input regarding new developments in their community and what builders to answer tough questions about improving infrastructure in the area to deal with new residents and traffic concerns. So far they have not had the answers they are looking for.
The main battle that the residents of the Toronto Entertainment District have been fighting is to preserve the King West Restaurant Row of Historic buildings from future condo development. This battle seems to be a futile one with many new condos already built, under construction or proposed. Buildings like TIFF - Festival Tower, Theatre Park, the Mercer, Hudson Condos, Glass and The Charlie all being built or recently completed.
Developers realize that area that have good transit options will be more desirable. Areas such as King West, Liberty Village, Etobicoke, Downtown, and North York Centre have seen rapid development. The developers are building in the areas where condi demand is the greatest. The condo developers restrict development based on what units are selling and which units are not.
The developers of Toronto's condos agree there will need to be long term planning and sustainable development to promote long term growth of the Toronto condo market.