High-rise condo market continues to climb
Most people want to own a home. But with legislation restricting the places where people can build, how will that affect consumers?
Real estate researchers, builders and developers at the Land and Development Conference in June looked at real estate trends you should know about.
Legislation has changed the legal framework of housing development, from the Greenbelt Act, where areas of land development are frozen, to the Places to Grow Act imposing boundaries. And the new City of Toronto Act would allow the municipality a range of powers, such as adding to the land transfer taxes as a way of getting revenue for the city. “All those things together either reduce the amount of land or make it more complicated to get an approval,” said Cynthia MacDougall, McCarthy Tetrault.
High-rises going up
In the first quarter this year activity in the residential condo market accounted for 50% of all new housing development in the greater golden horseshoe. “That has never happened in our history,” said Andrew Brethour, PMA Brethour. “This is the strongest condo market that we have ever seen.”
Brethour referenced a Greater Toronto Homebuilders’ Association survey showing that condos are not necessarily where consumers want to be, but where they can afford to be. What does a consumer want? Sixty-five per cent prefer a detached home in the suburbs, 80% believe the GTA is already too crowded and 79% say they will either stay put or move further out if housing prices rise substantially. They’ll jump the green belt.
“My biggest concern is the high level of investor involvement in the condo market,” said Brethour. Investors might pull out of the market quickly if it begins to soften, he said, which will lead to an adjustment or correction happening in the beginning of 2008.
Shelley Libfield, Conservatory Group, echoed Brethour concern over housing choice. “I think people who have families want to have a backyard. That is the culture that we have. By establishing the green belt and reducing the supply side, we are ultimately changing the way that people are being forced to live. It is not that they want to live in these high rise condos. They have no choice, in my opinion.”
Libfield said that the restriction on the supply side is making land very expensive. “January to April in the low rise side of the equation, were our worst months in five years,” he said. Buying a house, he said, “is showing signs of hitting up against the affordability wall.”
Low density land acquisition activity has been on the decline in the 905 in the past three years in particular, said Liz Sawicki, Firm Capital, since the legislation changes. Investments in low rise are expected to continue to drop, she said.
Sawicki highlighted allocation restraints in communities that have been designated as growth centres as a particular challenge. “Kitchener is an example of a growth centre that is not a growth centre. They are rationing out their greenfield sites, and trying to push development on their brownfield sites.” The developer then has all the considerations with remediation, which are extensive.
Less is more
People are shrinking the space they are living in, not just in high rise condos, but also in low rise homes, and so builders and real estate agents have had to convince buyers that less is more. This trend will continue, the panel agreed.
The “artificial reduction of supply” has come about because of legislation and infrastructure challenges now often passed on to developers from the municipalities, the panel agreed. The question then, says Brethour, is “Where will our children live and work when they are playing in the green field?”
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