Toronto Massey Tower Condos | 206.95m | 60s | MOD Developments | Hariri Pontarini

I always enjoy the posts by Mike more than anyone else. Someone living in the real world. I wish he would contribute more.
 
After having seen the exhortation "Greed", another word comes to mind: Envy.

Regards,
J T
 
That doesn't make any sense! Say you have a 2 bedroom in a building that is selling for $500,000. Say that 2 bedroom is taking up the space that could potentially be 2 small 1 bedrooms, or even 2 studio units. They could start from $250,000 or probably more. This means the builder will make more money. The construction is more yes, but ultimately will pay off as the units make more money for them.
 
Mike in TO said:
There are a lot of myths and false claims being tossed around regarding the factors driving smaller units sizes in the Toronto market. Profitability on a unit-by-unit basis is not one of those factors no matter how many times some individuals utilize loaded terms such as "Greed" (question, if I open a lemonade stand and turn a profit am I greedy?).

Let's examine a few factors and I'll break them down further later in the post:
  • Smaller units are more expensive to construct on a $psf basis for both hard construction costs as well as a range of soft costs
  • Smaller units are taxed higher on a proportional basis
  • Selling prices are generally on a $psf basis with some tweaks based on views, floor level, unit demand - there is not typically a substantial premium paid for smaller units

Basic numbers breakdown
  • 500sqf unit X $700 PSF = $350k vs 1000sqf unit X $700psf = $700k (builder grosses same $ for same amount of floor-space)
  • Developer has to net additional sales of a smaller units for every sale of larger unit
  • Twice the appliances for the smaller unit, plus twice the install costs for labour (kitchens & bathrooms most expensive components)
  • Additional heating, cooling, HVAC systems internal to each unit (cost more for many smaller units vs fewer larger units)
  • Other additional items: i.e drywall, mirrors, closets, doors - may not be much $ individually, but it all adds up over a large building
  • Twice Tarion enrollment fees
  • All additional legal and real estate internal soft costs associated with additional units
  • Substantially higher development charges for a building full of smaller units (1bdrm units are less than 2bdrm, but on a proportional basis a tower full of smaller units could be paying millions of dollars in additional DCs)
  • Cash-in-lieu of parkland dedication is based on a per-unit charge - substantial expense (especially in 905 municipalities where parkland charges can be over $20k even approaching $30k per unit) - a building full of smaller units could cost millions of additional dollars
  • Sec 37 - typically based on height & density, however # of units has direct impacts on community servicing and a building with substantially more smaller units can generate a higher charge
  • Internal servicing costs higher for a building with additional smaller units (i.e. water, waste water & some services in tower core that can eat up net saleable square footage + additional plumbing stacks required to service smaller units)
  • Additional staff requirements to manage additional units - especially the after-sales service for those units
  • Parking requirements substantially higher with additional smaller units vs fewer larger units - developers typically lose money on underground parking facilities - this is a major cost - furthermore if the number of additional parking stalls required results in addition sub-level floors being added this significantly lengthens construction timelines and adds to construction carrying costs.

If developers could move larger units just as fast as smaller units, they would be focus their efforts on the larger units as the municipal taxation implications, construction complexities as well as various hard and soft costs are lower when it comes to larger units. The issue comes down to affordability and with increasing taxes, land costs and construction costs impacting new condo pricing, developers are decreasing the size of units to bring the end price to the consumer down to an affordable level and down to at or near the $400,000 HST threshold level (2% marginal tax rate below that level & 8% above).

"Greed" has nothing to do with smaller units being constructed - market demand & housing affordability are the factors supporting smaller units. All things being equal, developers would rather build fewer larger units than additional smaller units.
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You use some pretty weaselly rhetorical tactics in your arguments.

Market demand is a simple euphemism for let's make as much money as possible. You use a lemonade stand in your example, so I'll use one. If the market demand for lemonade is $15 a glass because you're the only place you can get a drink is charging that much greedy? Hell yes it is. Doesn't mean you can charge that much forever or that it's a fair price for what you're getting.

Right now there's enough demand that developers can get away with building huge amounts of small units and make good margin on them. Those costs you're talking about are already built in to the pricing. So excuse me while I shed a single tear for those poor developers taking a bath on all these money losing developments (Hah!). It's not always going to be the case. And we're going to be stuck with a whole lot of studio and tiny one bedroom apartments because of it. And not much else.
 
do you have even a basic understanding of economics? Market demand has no "deeper meaning", it simply means , what people want to buy. it means what there is demand for in the market.


more basic economics: you could sell that drink for $15 sure, but nobody would buy it, as it would be more than what someone is willing to pay for it. You could drop that to say, $2 for a smaller glass, and you would get customers willing to pay that price. Same thing here. you could charge $600,000 for a 1000 square foot condo, but nobody would be willing to pay for it, so nobody would buy it. so you make a smaller unit for $400k, and sell it instead, as that is what people are willing to pay. simple economics. nothing else.

How can it be built into the price, if the smaller units sell for the same amount per square foot?

Tell me how people are just gobbling up larger units. I dare you to look at any condo project around 80% sold. almost, if not every single one bedroom will be sold. the two bedrooms, probably around 60-80%. the three bedrooms? maybe 10%. nobody is buying the bigger units. They are sold at the same pricepoint as the smaller units, the smaller units cost more to build, but developers prefer them because there is simply no market demand for larger units.

and again you come up with this hate for developers earning profits. how is that "evil"? that is the basis of how the modern society works. people earn money, and that makes the world go round. Provided you don't work in the public sector, you work to earn money as well. how is it that the developers are not allowed to pull a profit, especially considering how risky it can be to build a $50-100 million dollar condo project that is a 6-7 year process from land purchase to registration? that poses enormous risk.
 
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I'm going to echo what innsertnamehere has said.....nrb, your post is highly disrespectful, full of bluster, but says nothing.....looks to me that you simply can't afford to buy a condo, and you have a chip on your shoulder, and therefore developers are 'greedy'....pretty pathetic post imo....
 
We've actually purchased a condo here. Anyone who seriously thinks that any of this has little to do with greed is living in a different world. Capitalism by definition is based on greed, when it comes to markets, greed becomes a virtue and is hence institutionalized. Almost all these heritage restorations and seemingly goodwill gestures are generally undertaken to maximize profit in the end, it is done to pump demand or simply increase brand value, they teach you this kind of stuff in introductory marketing classes. If there actually is a capitalist who is to truly willing sacrifice profit in order to undertake such gestures, well, then his actions are simple in contradiction with his actual institutional role, which is to maximize profit before any thing else. It does happen time to time, but its quite rare.
 
tiffer24 said:
And you purchased your condo with the hope that the value will increase at some later date so you can use that profit for your own selfish reasons. Welcome to the capitalist world, motime.
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That's how the system works, I never played the holier than thou line. This is the way wealth gets concentrated, capital creates more capital. There really isn't a moral way to accumulate tons of capital in this day and age, most people get rich sitting on their asses doing nothing while their investments grow through little or no labour output of their own.
 
Rather than arguing against the development of large buildings with many small units, you should be arguing that developers should be forced to prepare knockout panels in the walls of smaller units so that they can, in the future, be consolidated into larger units by assembling two or more smaller units. That's what people should be arguing for.
 
Parkdalian said:
Rather than arguing against the development of large buildings with many small units, you should be arguing that developers should be forced to prepare knockout panels in the walls of smaller units so that they can, in the future, be consolidated into larger units by assembling two or more smaller units. That's what people should be arguing for.
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+10
 
" developers should be forced to prepare knockout panels in the walls of smaller units "
QUOTE.

Another, "Add it to The Mort gage" that doesn't work.


J T
 
Transportfan said:
The problem with that is that you lose a lot of soundproofing between the units.
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Most of New York is steel construction. They seem to be able to do soundproofing without their walls being load-bearing concrete. Heck, most of the walls can still be load-bearing concrete - it's just that some parts of them should be regulated as non-loadbearing: you just need to make it possible for doors to be punched through the walls. Currently, if you even knock a nail into many condo walls you could be "compromising the integrity of the building."
 
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