Why the cost of condos in Toronto continues to rise
There was a lot of buzz on Twitter recently when many realtors and industry professionals started the discussion on the long list of reasons as to why Toronto condo prices have risen so substantially over the past decade.
The fact that condo prices are increasing shouldn’t be a surprise to anyone who’s been living in the GTA. Our housing market has been red hot, and condos have become the go-to option for buyers who can no longer afford detached homes and who want to live in bustling downtown locales. Condos have also been popular with investors who buy units and rent them out, generating decent returns.
Andrew LaFleur, a well-known and respected realtor in the pre-construction industry, outlined 15 factors that have contributed to the rising GTA condo prices; I’m going to focus on a few of the key ones.
LACK OF LOW-DENSITY LAND
The scarcity of land for the development of detached homes has had the most significant impact on Toronto real estate. The province’s pro-intensification growth policy has triggered a huge shift in the market, forcing developers to build up, not out. Amid ever-shrinking supplies of lowrise homes, prices for that product have gone through the roof. This has pushed purchasers into condos. And while condos are cheaper than lowrise homes, the ever-rising popularity of this product type has meant a steady uptick in prices.
Toronto is a popular destination for newcomers from across Canada and around the world, with most newcomers choosing to locate in the city centres. Despite all the cranes you see on the skyline for condo projects, we are actually not building enough new units to accommodate this influx. And supply and demand dynamics mean condo prices have been steadily climbing amid this strong desire among newcomers to live in centrally located condos.
LOW INTEREST RATES
The GTA condo market has benefited from historically low interest rates over the past decade, as buyers have been able to borrow money cheaply to purchase condos. But the surge in demand for condos, amid a lack of supply to meet that demand, has meant sizeable increases in condo prices. And the uptick in interest rates of late has driven the cost to purchase a condo even higher.
Condo buyers want to be located in proximity to amenities like transit and walkable neighbourhoods, as well as shops, restaurants and entertainment. But while there used to be pockets of cities where condos were priced lower because those areas were considered frontiers for pioneering purchasers, spots like these are fewer and farther between now. Growing urban gentrification means there are no longer discounts to buy in locations boasting potential. Condo buyers must pay big bucks to live in the centre of the action.
TALLER CONDO TOWERS
It used to be that a 50- or 60-storey condo building was exceptional; now we’re seeing towers shooting up past 70 storeys, and soon higher than 80 and 90 storeys, just like in New York and Hong Kong. These “super-talls” are more expensive to develop, due to increased costs for material and labour, and the sophisticated technology and infrastructure to support these towers. Those increased costs are passed on to condo buyers, pushing up average prices. As Toronto gets more super tall towers, expect higher premiums. It’s the cost we pay to live in a world-class city.
Debbie Cosic, CEO and founder of In2ition Realty, has worked in all facets of the real estate industry for over 25 years. In2ition.ca