Marketing, location key elements
But labour, material shortages problematic
By Derek Raymaker – Globe and Mail
If there is one colossal headache associated with buying a condominium from a blueprint, it’s waiting around for it to get built.
Early in Greater Toronto’s second great condo building spree, beginning in 1997, a lot of planned projects that were selling suites in preconstruction took as long as five years to see the light of day, frustrating many buyers who took the promised occupancy dates as the gospel truth.
Those were the days when resale low-rise houses, semis and townhouses were relatively affordable, at least compared with today. And interest rates, at one point, were at all-time lows, but they weren’t quite low enough to prod large numbers of young people to jump into the market. It was also the heyday of investor infatuation with newly public technology companies that were racking up impressive stock prices on equity market — before anybody figured out that very few of them could deliver a workable business model to deliver some kind of cash flow.
Much has changed since those days now almost 10 years past. First, low-rise resale prices have ballooned to the point where they are generally out of reach for young buyers with less than $50,000 for a down payment, particularly in areas that have a lot of cachet and good schools.
At the same time, a lot of investors realized (usually after taking a major beating in the stock markets on their trendy tech equities) that renting out a condo suite produces regular cash flow and the reliable income considered to be so passÃ© during the tech bubble.
Finally, and this has come as a little bit of a surprise, the number of buyers over 55 whose children have moved away from home have become an important sector of condo buyers. A healthy number of these buyers own extremely valuable detached homes, many that are mortgage-free, so they can easily afford larger and more luxuriously appointed suites. A great number of higher-end suites have been launched around north Toronto, Etobicoke, Oakville and York Region to lure these buyers — in neighbourhoods where they already live so that they can continue to remain in close proximity to their friends and favourite shops.
Of the 66 Toronto-area projects that will be occupied within the next six months, most began inking purchase deals in 2003. But those appealing to older, affluent buyers located outside of Toronto’s core have made it to occupancy faster than others. These included Daniels Corporation’s Kilgour Estates near Bayview and Lawrence Avenues, which kicked off only last year with prices starting at $479,000 and going as high as $1,595,000. Marketing and location remain the key to building buzz about a project to the point of getting it under construction as soon as possible. And necessity has made many condo builders into pretty savvy marketing machines.
In order to move into construction, condo developers generally have to sell at least half of their planned suites before a shovel hits the ground in order to prove to lenders that the project is on safe financial footing. So getting a good start out of the gate on marketing can directly affect the occupancy date two or three years down the road.
The market conditions that are likely to delay occupancy in 2006 are no longer predominantly based on the buyer’s choice or financial considerations. The supply of labour and materials has become a big headache that can hold up construction for months. And these shortages can be directly traced to the massive number of projects now under way.
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