There has been a secret battle going on underneath everybody’s noses without us knowing. This is the secret battle between the cities of GTHA and many developers. Remember 1-3 years ago when the consensus from the general population of Toronto was: “Too many glass towers, stop it”? Well, when there is strong public opinion, it usually reaches some level of government, a public statement is given and often as a result, some kind of action is taken (i.e., new rent control policies).
Earth to Houston, we have a supply problem. Currently, there is actually not enough supply of new build projects versus demand. We all knew before that brand new freehold homes have been super hot for the past few years (see my previous blog), but it has now escalated into new build condos as well. This is part of the shift to affordability that I have been talking about for a while now (still no crystal ball here, but the numbers don’t lie!). The dream of owning a freehold home is now becoming a far-fetched dream for many, unfortunately. I wholeheartedly believe that in the next 10 years, we will be seeing the biggest land grab in GTHA we’ve ever seen. (Spoiler alert! More on that next week).
So this secret battle between the cities of the GTHA has been brewing for quite some time as developers encounter a gazillion red tapes to put a project up. A few years ago, the city was not giving out permits to developers to build high rises. On average, approximately 20,000 condo units are finished per year. Theoretically, this would mean that throughout the past 4-5 years, projects would be approved, built, completed and closed. However, last year, we experienced a low in the number of completed condo units due to permit stoppages a few years ago. Only 16,000 units came online in the market – this factor contributed to a heated market last year. Realizing the changes in our economic and housing landscapes, the city has shifted gears into more affordable housing and intensification in the cores (Downtown Toronto, SquareOne/Downtown Mississauga, Downtown Markham, Vaughan Metropolitan Centre) and are allowing permits. Despite this, they are not approving the permits at the usual historical speed, which ultimately still leads us back to a lack of supply of new build condos.
Theory Project – SOLD OUT! A few of you who have been following the Theory Project in downtown Toronto will probably know what is currently happening. For those of you who have not been following Theory, this development is a prime example that clearly illustrates our supply-demand problem. Theory is a 29-story, 309 unit building right across from the University of Toronto St. George Campus. Theory has one of the best locations that I’ve seen and so, I’ve been recommending it to many of my clients. This project was never officially launched but ironically enough, it is sold out already. Here is the kicker – not only is it sold out, but it also broke all price records. The Platinum pricing we got was estimated at $1,100 – $1,150 per square foot, which is the highest that I’ve seen in Toronto. The developer, Parallax, never gave anybody a price sheet and just told us to submit worksheets for clients based on that price range. A few of my clients who submitted really early are still waiting to hear back from them (it’s been 2 weeks, which is really odd). I spoke to the developer as I had a few more clients interested in Theory and was told to submit worksheets, this time, at a whopping $1,350 – $1,400 per square foot. That’s a ~20% increase in pricing within a span of 2 weeks. Talk about appreciation! It turns out that the project had so much interest and worksheet submissions that the developer could have sold 3-4 buildings (it’s unfortunate they actually only have one!). That is simply absurd if you ask me!
So what can we gather from this? The appetite for investment-worthy new build condos is out there. There is still money being put into the Toronto real estate market. For the developer to start their pricing at $1,100 also tells me that they foresee this trend of condo growth as well.
Hopefully, the city will loosen the grips on these permits and allow for increased intensification to meet this exceptionally high demand soon. This is when soon can’t come soon enough. We’ll just have to be patient folks. In the meantime, there are a few investment-worthy projects out there. If you want to get into the game, give me a call and I’ll set you up for success.
Until next time, Happy Real Estate-ing!