Perspectives: We All Need Housing
By NextHome Staff
March 01, 2018
March 01, 2018
And there is no time like the present to get into the marketBefore I get into this article, I want to express my thanks to HOMES Publishing Group for inviting the International Home Marketing Group team to be regular contributors to the magazine. After being a long-time reader, it is an honour to be a first-time provider of information from the sales floor.Two common questions that we get asked all the time are: “Where are these home prices going?” and “Will it keep getting more expensive over the long term?”Truth is, if I could answer these questions with complete accuracy I would probably be rich — and retired — by now. The market fundamentals in the GTA are strong and will continue that way. With immigration not slowing down, job growth rising and vacancies for rental properties staying at historic lows — we need housing.
Market forces propelling value upwards are the strongest in Toronto’s downtown core; people want live close to work, and their willingness to live in a vertical world for a lifestyle that puts them in the heart of the action, has fuelled the condo boom. The issue with pricing these types of homes is what it takes to deliver an amazing project in a desirable location.It starts first with the price of land and where it has been going. If the purchasers think condos have gone up in price lately, you should see what some of the recent land transactions look like. A little over 18 months ago, we saw — and thought — that land price purchases were crazy, but those purchase prices now look like a steal as we have seen many recent transactions more than double what they were just a short time ago.Selling over 25,000 units preconstruction means one simple thing: we now need to build these units. This puts pressure on the pricing of material, which continues to escalate. As well, well-trained trades and consultants come at a premium, which all adds to putting upward pressure on the ultimate sales price.One of the biggest factors — and could not only take up a full article, but perhaps a full magazine — are the various levels of government that mire the industry in red tape and delays in timing. This is the industry’s greatest current constraint on being able to bring housing to market and deliver projects in a timely manner. The zoning process has moved well beyond frustrating and, with the current changes in policy, it is almost impossible to make a land deal with the confidence that you will be able to build what will be needed to make the land purchase worthwhile. Not to mention delivery-timing risks that could easily erase any possible profits.The public never gets an explanation of the true costs involved and risks associated. When we’re pumping gas we can see the breakdown of costs associated with a litre of gas right on the pump, and the small amount left over as pure profit. These narrow margins are also true of our industry. It’s my personal belief that with such great risks, developers and builders will need to take greater profit margins in the future to ensure the sustainability of the industry.In addition to this, knowing the high prices paid for future sites, the hard costs to build a project, as well as the soft costs and red tape, it’s clear that we cannot sell for less in the future. Supply and absorption may slow down due to economic factors. Supply will most certainly slow down based on government approval factors, but prices should continue to rise.
Elliott Taube is president of International Home Marketing Group, a full-service sales management and marketing firm.IHMG.ca
Market forces propelling value upwards are the strongest in Toronto’s downtown core; people want live close to work, and their willingness to live in a vertical world for a lifestyle that puts them in the heart of the action, has fuelled the condo boom. The issue with pricing these types of homes is what it takes to deliver an amazing project in a desirable location.It starts first with the price of land and where it has been going. If the purchasers think condos have gone up in price lately, you should see what some of the recent land transactions look like. A little over 18 months ago, we saw — and thought — that land price purchases were crazy, but those purchase prices now look like a steal as we have seen many recent transactions more than double what they were just a short time ago.Selling over 25,000 units preconstruction means one simple thing: we now need to build these units. This puts pressure on the pricing of material, which continues to escalate. As well, well-trained trades and consultants come at a premium, which all adds to putting upward pressure on the ultimate sales price.One of the biggest factors — and could not only take up a full article, but perhaps a full magazine — are the various levels of government that mire the industry in red tape and delays in timing. This is the industry’s greatest current constraint on being able to bring housing to market and deliver projects in a timely manner. The zoning process has moved well beyond frustrating and, with the current changes in policy, it is almost impossible to make a land deal with the confidence that you will be able to build what will be needed to make the land purchase worthwhile. Not to mention delivery-timing risks that could easily erase any possible profits.The public never gets an explanation of the true costs involved and risks associated. When we’re pumping gas we can see the breakdown of costs associated with a litre of gas right on the pump, and the small amount left over as pure profit. These narrow margins are also true of our industry. It’s my personal belief that with such great risks, developers and builders will need to take greater profit margins in the future to ensure the sustainability of the industry.In addition to this, knowing the high prices paid for future sites, the hard costs to build a project, as well as the soft costs and red tape, it’s clear that we cannot sell for less in the future. Supply and absorption may slow down due to economic factors. Supply will most certainly slow down based on government approval factors, but prices should continue to rise.The key takeaway: if you want to buy and have the means, there is no time like the present.The lowrise side of our business has many other factors to discuss. I look forward to examining that with you in a future issue.
Elliott Taube is president of International Home Marketing Group, a full-service sales management and marketing firm.IHMG.ca