Welcome to Part 2 of our interview with Ben Myers of Urbanation. The second half of our conversation is focused mainly on the condo market as it stands today, and where we are headed.
NewInHomes (NIH): We have to ask you, and you’re probably sick of talking about it, but will this bubble burst?
Ben Myers (BM): We have hit the peak of the market, we had 28,000 suites hit the market last year, and conservatively speaking, 18,000 to 20,000 of those were bought by investors. Those investors have a lot already in the market, they read the newspapers and see the buzz about oversupply and bubble talk, so they’re kind of backing off at the moment. If we have an AAA project, if there are deals out there that they feel are undervalued, they will pounce on it, these are smart people. We still have a very healthy market, better than any in North America, but we may not be setting records like we have in the past. I don’t think there will be a negative crash, and we do have a high amount of supply hitting the market, so it will be interesting to see how investors react.
NIH: How are we doing supply wise in regards to the population growth of the CMA?
BM: The Toronto CMA tacks 90,000 to 100,000 people each year. The question is, how many units are needed to house that amount of people. How do we keep up with that demand? We are obviously building smaller suites and people are getting married later in life, so it’s stretching the need for condominiums. So the question is, how many units is enough? Is it 40,000 units, is it 30,000 units?
It’s difficult to say. We have delivered over the past five years an average of 12,500 condominiums for the entire Toronto CMA. The highest number of suites that we have seen released in the past was in 2010, and we didn’t really see much of an impact in the new-home or resale statistics. This year, 18,000 to 20,000 should be released, and we’re looking at 25,000 the year after, so twice as much as we have in the past. Now, we always have outside factors such as strikes and construction delays, but we have never done two years in a row of 20,000 units hitting the market—that’s a lot of product to absorb.
NIH: If population growth is such an issue, why aren’t three-bedroom units being built anymore?
BM: They aren’t designing them because people aren’t buying them. It’s that basic—if people wanted them, they would buy them. The price of a three-bedroom, 1,000-sq.-ft. condo could be around $650,000. For $650,000, people could probably get a nice detached home near the subway with a backyard. That’s why it hasn’t taken off. Will we ever get to the point that we could build that 1,000-square-foot unit and sell it for $700,000 because detached homes are now worth $1.7 million? Sure, but right now the numbers just don’t work.
NIH: Can you talk to us a little about new condos in the 905 area?
BM: It’s funny, in the past, most 905 condo projects were limited to small heights with limited finishes. It was like taking a low-rise unit and putting it into a condominium. Now we are actually getting high-rise towers with granite countertops and stainless-steel appliances and all that cool stuff that we usually see downtown. Now that they’re getting it, they are staying in the 905 and enjoying life. It’s another aspect of the market that we need to look at. To commute into the city is such a huge issue. I couldn’t imagine living in Aurora and having to commute in every day. Sure, it’s great to have the home and the yard you always wanted, but what’s the use if you have to drive over two and a half hours every single day.
NIH: So, with commuting being an issue, what has been the hot spot for young professionals?
BM: As a young person, you want to be in the middle of the action—be it Liberty Village, or King West of the downtown core. That’s where the jobs are, that’s where the fun is, that’s where everyone seems to be headed. The Entertainment District has been the hottest area. Just walking through it, almost every street corner has some sort of development going on. You’re walking distance from everything.
NIH: With your knowledge of the market, can you tell us where Toronto’s next hot spot will be?
BM: I’ve been saying for a while that the downtown east area is prime for development. Eve, the owner of Urbanation and Marketwire, has been working on a project called King Plus Condos. It’s right at the corner of King St. East and Sherbourne, minutes from the lake, walking distance from St. Lawrence Market and Yonge Street, and its $550 a square foot. The same prices that you get in Richmond Hill. That area is being ignored. Once you see the Distillery District build up and the West Don Lands coming together, we should see prices shoot up in that area, and more interesting developments will start popping up.
We would like to extend our thanks to Ben Myers and Urbanation for sitting down and having this great chat with us—it was a lot of fun!Google+