Migos
Active Member
Only a couple cities keeping the price appreciation going...
|
|
|
Baby, we got a bubble!?
- Thread starter simuls
- Start date
Only a couple cities keeping the price appreciation going...
salsa
Senior Member
Skyrocketing cost of housing worries builders, realtors
http://www.thestar.com/business/201...ost-of-housing-worries-builders-realtors.html
http://www.thestar.com/business/201...ost-of-housing-worries-builders-realtors.html
torontologist
Active Member
Wait a minute, these developers want us to think that they are building increasingly smaller units to.... save us money?!.... give me a break.
Migos
Active Member
It's true. They are creating smaller and cheaper home so people can actually afford them. Governments have saddled developers with such high fees that it is impossible to create new, affordable housing in many municipalities.
http://www.thestar.com/life/homes/2014/08/29/new_neighbours_pay_growing_share_of_fees_charges.html
Politicians love development fees because they can hide these tax increases from unsaavy voters. Raising property taxes is much more transparent. New home buyers pay a disproportionate amount of real estate taxes.
Memph
Active Member
While the authors of that article seem to be trying to argue that demand for low rise is stronger than high-rise, the evidence they use is misleading. New low rise home prices have gone up 107% vs 53% for new high rise homes, but low rise homes have gotten bigger while high-rise homes have gotten smaller. In terms of per sf increase in seems they've both increased by about 80-85%. It does seem to be a peculiar paradox when housing prices for low rise are getting more expensive that houses are getting bigger and bigger, but this IMO due to zoning regulations* that make small houses uncompetitive against big houses in a tight land market. Allow housing like you see in Japan with houses on 500-2000sf lots and with 15ft wide street ROWs or multiple houses one behind another front a single street, and more modest houses will be more competitive.
It's also worth noting that high-rise housing and just apartments in general are still significantly more expensive per sf than low rise. That should come as no surprise when low rise single family homes can be built anywhere that allows residential uses while apartments are only allowed in a small fraction of residentially zoned land. In a tight housing market, the least expensive housing types tend to get more expensive, so it would kind of be expected that low rise, which is less expensive per sf, would see prices rise faster, even if preferences for low rise vs high-rise are equal. However, in this case it seems high-rise and low-rise prices are rising at a comparable pace per sf.
As for developers trying to save homebuyers money... Developers will try to make as much profit as they can. With a less competitive sellers market (due to limited supply) they can get away with higher prices per sf. However that doesn't mean homebuyers can afford to pay more for homes, so they just make them smaller. To be clear though, it's not just the developers getting all the extra profit, anyone with land to sell to the developers will also be benefitting from this limited supply and will be successful in charging high prices for developers for their land. That goes for people selling parking lots and low rises to downtown high-rise developers, or bungalow owners selling to custom home builders as well as farmers selling to subdivision buildings. In fact the land-owners might be benefitting even more than the developers.
Regarding development charges... Aren't those supposed to be tied to development impacts? I know there's a cap to how much municipalities can charge, a cap many communities have already hit. I would expect the development impacts of new development to be relatively high, with the arterial road widenings they'd require, congestion they cause on the highways, new schools, etc. More dense housing in more central locations would have lower impacts although unfortunately the development charges don't depend on location and are only loosely tied to density. But all in all aren't municipalities required to justify their rates for development charges? IE the increase should be seen as less of a tax increase and more a reduction/elimination of new housing subsidies?
*These include
-off street parking requirements
-minimum ROW width requirements
-density/FSI caps and height limits even for SFHs and townhouses
-high development charges based on unit type regardless of size or density (or even the same for all units no matter the type)
-setback and minimum lot size/width/depth requirements
It's also worth noting that high-rise housing and just apartments in general are still significantly more expensive per sf than low rise. That should come as no surprise when low rise single family homes can be built anywhere that allows residential uses while apartments are only allowed in a small fraction of residentially zoned land. In a tight housing market, the least expensive housing types tend to get more expensive, so it would kind of be expected that low rise, which is less expensive per sf, would see prices rise faster, even if preferences for low rise vs high-rise are equal. However, in this case it seems high-rise and low-rise prices are rising at a comparable pace per sf.
As for developers trying to save homebuyers money... Developers will try to make as much profit as they can. With a less competitive sellers market (due to limited supply) they can get away with higher prices per sf. However that doesn't mean homebuyers can afford to pay more for homes, so they just make them smaller. To be clear though, it's not just the developers getting all the extra profit, anyone with land to sell to the developers will also be benefitting from this limited supply and will be successful in charging high prices for developers for their land. That goes for people selling parking lots and low rises to downtown high-rise developers, or bungalow owners selling to custom home builders as well as farmers selling to subdivision buildings. In fact the land-owners might be benefitting even more than the developers.
Regarding development charges... Aren't those supposed to be tied to development impacts? I know there's a cap to how much municipalities can charge, a cap many communities have already hit. I would expect the development impacts of new development to be relatively high, with the arterial road widenings they'd require, congestion they cause on the highways, new schools, etc. More dense housing in more central locations would have lower impacts although unfortunately the development charges don't depend on location and are only loosely tied to density. But all in all aren't municipalities required to justify their rates for development charges? IE the increase should be seen as less of a tax increase and more a reduction/elimination of new housing subsidies?
*These include
-off street parking requirements
-minimum ROW width requirements
-density/FSI caps and height limits even for SFHs and townhouses
-high development charges based on unit type regardless of size or density (or even the same for all units no matter the type)
-setback and minimum lot size/width/depth requirements
TheKingEast
Senior Member
Developers crying because the gravy train looks like it will be coming to an end? Devs are NOT looking out for purchasers, they're looking out for their pockets. All those hands in the pot.
tripwire
Active Member
Perhaps, but I'm not sure if any/much savings would trickle down to the individual buyer, even if these developer fees were lessened. Also, it already seems to me that developers are passing on quite a number of said fees to the general public buyers.
gentlepuppies
Active Member
Memph, the fact that condo and house prices are increasing at the same rate per built square foot only points to the fact that it's the condos that are overpriced. Most of the value of a SFH is in the land since it's a finite resource, whereas more condos can always be built, especially in this city, where they seem to be able to build anywhere out of context.
Memph
Active Member
Well most of the SFHs are in the 905 where land values are not as high. A substantial chunk of condos on the other hand are downtown where land values are the highest.
I also disagree that condos can be built anywhere. For the most part, they can only be built in the following locations within the city proper
-land formerly zoned for retail, most (all?) of which has been rezoned to mixed use
-downtown and the centres
-avenues
-lower density apartments (either tear down of low rises or infill of towers-in-the-park)
-much of the industrial/formerly industrial areas in Old Toronto
However I think much of the industrial/employment lands of the inner suburbs (Scarb/North York/Etobicoke) is off limits and just about all low rise residential is off limits. Areas that allow condos are I'm guessing to the tune of 5-10% of the city proper's land area and an even smaller % of the 905's land area. I'm pretty sure land where zoning allows high-rise condos is worth more than low rise zoned land even adjusting for location.
As a result, I think the value of the land the average condo sits on could be something like 10x the value of the land the average house sits on, due to a) condos being more centrally located and b) different zoning.
I wouldn't be surprised if houses in centrally located neighbourhoods like Cabbagetown, Little Italy, Leslieville or Davisville saw their values increase by more than 80-85% from 2005 to 2015 whereas in Brampton or Ajax the increases might've been more like 50%? Keep in mind this is new homes which in the case of houses are built almost entirely in the outer suburbs while new condos have been built in the core.
It's also possible there's a shortage of smaller units, which houses are unable to fill while condos can.
I also disagree that condos can be built anywhere. For the most part, they can only be built in the following locations within the city proper
-land formerly zoned for retail, most (all?) of which has been rezoned to mixed use
-downtown and the centres
-avenues
-lower density apartments (either tear down of low rises or infill of towers-in-the-park)
-much of the industrial/formerly industrial areas in Old Toronto
However I think much of the industrial/employment lands of the inner suburbs (Scarb/North York/Etobicoke) is off limits and just about all low rise residential is off limits. Areas that allow condos are I'm guessing to the tune of 5-10% of the city proper's land area and an even smaller % of the 905's land area. I'm pretty sure land where zoning allows high-rise condos is worth more than low rise zoned land even adjusting for location.
As a result, I think the value of the land the average condo sits on could be something like 10x the value of the land the average house sits on, due to a) condos being more centrally located and b) different zoning.
I wouldn't be surprised if houses in centrally located neighbourhoods like Cabbagetown, Little Italy, Leslieville or Davisville saw their values increase by more than 80-85% from 2005 to 2015 whereas in Brampton or Ajax the increases might've been more like 50%? Keep in mind this is new homes which in the case of houses are built almost entirely in the outer suburbs while new condos have been built in the core.
It's also possible there's a shortage of smaller units, which houses are unable to fill while condos can.
gentlepuppies
Active Member
A huge proportion of the condos in Toronto aren't located centrally or even in a walkable area. There is more than enough former retail/industrial areas, avenues, low-rise apartments, parking lots, etc in Toronto to sustain this pace of ill-planned condo development for a few centuries. This site's Project of the Day today is Argento Condos, built in the middle of nowhere, $700 psf asking prices. To me, the land is no more valuable than the suburban sprawl across the street, in this sad isolated corner of town, nestled between 2 freeways and an arterial that's basically a highway. There are 2 kinds of apartments, the ones people pay a premium for to enjoy the conveniences of urban living, (which don't exist here), or the ones people buy because they can't afford a house. When you are paying a premium to live in a condo among house-rich SFH owners who whizz past you on the way to ikea, that's a sign that the end is near.
Memph
Active Member
I would still say that about 50-60% of new condos are located in relatively central and walkable areas. Another 20-30% in relatively central and unwalkable areas, and the last 20% or so in slightly central and unwalkable.
For new SFHs (not all, we're just looking at NEW) it's about 1% central and walkable, 5-10% in relatively central and unwalkable and 90-95% not even slightly central but way out on the edge and unwalkable.
The land in the Argento area is probably somewhat more valuable due to the zoning differences although I agree that if not for that it would be the same. While a bit more expensive per sf (maybe $600 psf for SFHs?) they are still less expensive total. Houses for $400k are very rare until you get to Bradford or Clarington. If existing SFHs could be subdivided more easily condos would be less competitive. Right now I suspect many of those condo buyers don't have the option of taking on a bigger mortgage to get a better deal per sf. While that area is not walkable and not especially close to Downtown, it's still closer to downtown than many other areas and also pretty well located in relation to suburban job centres.
For new SFHs (not all, we're just looking at NEW) it's about 1% central and walkable, 5-10% in relatively central and unwalkable and 90-95% not even slightly central but way out on the edge and unwalkable.
The land in the Argento area is probably somewhat more valuable due to the zoning differences although I agree that if not for that it would be the same. While a bit more expensive per sf (maybe $600 psf for SFHs?) they are still less expensive total. Houses for $400k are very rare until you get to Bradford or Clarington. If existing SFHs could be subdivided more easily condos would be less competitive. Right now I suspect many of those condo buyers don't have the option of taking on a bigger mortgage to get a better deal per sf. While that area is not walkable and not especially close to Downtown, it's still closer to downtown than many other areas and also pretty well located in relation to suburban job centres.
Migos
Active Member
There is competition in the real estate market. If a developer doesn't drop their prices, another one will and eat into their market share. That's the reason that all businesses in competitive markets need to be price competitive. Developers are competing with other new home developers, existing housing stock, and the renovation market.
James
Senior Member
TREB market watch for the month of November 2015 are out.
http://www.trebhome.com/market_news/market_watch/2015/mw1511.pdf
Average sale price of detached homes in the 416 was $1,018,621 representing an 8.8% year over year increase. Before anyone comments on the average price breaching the $1M once again, let's break out the average pricing in a slightly more meaningful manner:
Detached Houses
Toronto West: $791,124 average / $685,000 median
Toronto Central: $1,559,893 average / $1,377,500 median
Toronto East: $745,718 average / $662,544 median
Average sale price of condos in the 416 was $415,316 representing a 5.4% year over year increase. Similarly, it's helpful the separate the areas west and east of the central core to get a better idea what the more typical average condo price is:
Condominium Apartments
Toronto West: $348,003 average / $310,625 median
Toronto Central: $466,939 average / $395,000 median
Toronto East: $293,234 average / $270,000 median
There's an article in the Toronto Star today as well:
GTA sets new annual home sales record – in November
Some 7,385 houses and highrise condos changed hands in November, up 14 per cent year over year. The average sale price of a home climbed to $632,685, up 9.6 per cent from a year earlier
http://www.thestar.com/business/2015/12/03/gta-sets-new-annual-home-sales-record-in-november.html
http://www.trebhome.com/market_news/market_watch/2015/mw1511.pdf
Average sale price of detached homes in the 416 was $1,018,621 representing an 8.8% year over year increase. Before anyone comments on the average price breaching the $1M once again, let's break out the average pricing in a slightly more meaningful manner:
Detached Houses
Toronto West: $791,124 average / $685,000 median
Toronto Central: $1,559,893 average / $1,377,500 median
Toronto East: $745,718 average / $662,544 median
Average sale price of condos in the 416 was $415,316 representing a 5.4% year over year increase. Similarly, it's helpful the separate the areas west and east of the central core to get a better idea what the more typical average condo price is:
Condominium Apartments
Toronto West: $348,003 average / $310,625 median
Toronto Central: $466,939 average / $395,000 median
Toronto East: $293,234 average / $270,000 median
There's an article in the Toronto Star today as well:
GTA sets new annual home sales record – in November
Some 7,385 houses and highrise condos changed hands in November, up 14 per cent year over year. The average sale price of a home climbed to $632,685, up 9.6 per cent from a year earlier
http://www.thestar.com/business/2015/12/03/gta-sets-new-annual-home-sales-record-in-november.html
wang888
Active Member
I am always curious how people are able to borrow so much money. What do you think the loan to value on that million dollar home?
rbt
Senior Member
Quite possibly under 50%. Buy condo/townhouse, pay down property over 8 years ($150k household income; it goes quickly if you want), live in it for a couple more years, scale up to the $1M house with a $500k deposit.
It's very unusual for it to be a starter home to a couple with $200k/year income needed to carry an 85% LTV mortgage; $48k/year to the mortgage but it does happen.
Last edited: