Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
I’ve been having a lot of discussions lately about ceiling heights. The clear height from the top of the floor to the underside of the ceiling.
In Toronto there has been a bit of an evolution in ceiling heights. Older apartment and condo buildings often have 8’ ceilings. Newer buildings today often have 9’ ceilings. And we’re now seeing 10’ ceilings creep into the market, though I wouldn’t say it’s close to becoming the standard. It’s more at the top end. Of course there are also loft buildings with even higher ceilings.
I am personally big on ceiling height. But I would be very curious to hear from the Architect This City community on this one.
How high are your ceilings? What do you consider ideal? Do you even care? And is there a ceiling height where it would become a deal breaker for you when it comes to buying/renting a new place? I also think your actual height might have an impact on preference, so it would be great to also hear how tall you are.
I have 10’ ceilings in my place. Not because my place is all that special, but because my suite is on the same floor as the building amenities. So the higher ceiling height is carried through (the rest of the building is 9’). I think it makes a big difference, particularly since my place isn’t all that big. I’m 6'3".
Let me know your thoughts in the comment section below. This is great market feedback that will certainly be taken to heart.
As further evidence that real estate is a local business, let’s take a look at the housing market in Japan today. It’s a very unique market.
According to this Freakonomics podcast, 50% of all single family houses in Japan are demolished by the time they reach 38 years old. That’s their half-life. By contrast, in the US, this number is 100 years.
The reason for this is rapid depreciation. Real property typically consists of two things: land and the building. Land doesn’t depreciate. But the structure sitting on the land does.
In Japan, the building or structure is thought to be fully depreciated (and therefore worth nothing) after about 30 years for a single-family home and after about 40 years for an apartment/condominium.
The result is that there’s virtually no resale housing market. When somebody buys a house, it is usually torn down and completely rebuilt. It’s a uniquely Japanese phenomenon.
So why does this happen?
The Freakonomics podcast presents a couple of hypothesis. Some believe that it’s caused by a Japanese fixation with newness. New is seen as pure and clean.
Others believe that it has to do with a building code that is constantly changing due to the high frequency of earthquakes in Japan. 20% of the world’s earthquakes with a magnitude of 6.0 or greater happen in Japan. And so there appears to be a belief that newer homes – with the latest seismic technologies – are the safest.
Whatever the case may be, the fact that there’s virtually no resale housing market in Japan, not surprisingly, produces some interesting outcomes. For one, maintenance and DIY home projects are uncommon. Why invest in your home when it’s not viewed as an asset, but as a disposable good?
At the same time, people worry very little about marketability when they are building new. And this is a big reason why Japan is so famous for its radically designed homes. When you’re building only for yourself, you just do what you want.
But most importantly, some (such as Richard Koo, who is interviewed in the podcast) believe that this approach to housing is a huge “obstacle to affluence.” Without a functioning resale market, the Japanese don’t get the opportunity to build wealth/equity in the same way that other countries do.
Do you buy that?
On my way back from Philadelphia this past weekend I wrote a post called, The Philadelphia (real estate) story. It was about how opposite the market is in Philly compared to Toronto.
After writing that post and because of a discussion in the comment section, I started thinking about condo vs. rental apartment development across the US. Because unlike cities such as Toronto and Vancouver, it struck me that – outside of maybe New York and Miami – most U.S. cities are really not building a lot of for sale condos. And if you’re from Toronto or Vancouver, I bet that feels odd to you.
But what exactly is that number?
As of the first quarter of 2015, condos as a percentage of all new multifamily (apartment) construction in the US was only 5.5%. That’s a tiny number and is down from over 50% before the Great Recession, which means most cities in the US really are building mostly rental. Last year the US built 264,000 multifamily units across 11,000 buildings.
I’ve been having a lot of discussions lately about ceiling heights. The clear height from the top of the floor to the underside of the ceiling.
In Toronto there has been a bit of an evolution in ceiling heights. Older apartment and condo buildings often have 8’ ceilings. Newer buildings today often have 9’ ceilings. And we’re now seeing 10’ ceilings creep into the market, though I wouldn’t say it’s close to becoming the standard. It’s more at the top end. Of course there are also loft buildings with even higher ceilings.
I am personally big on ceiling height. But I would be very curious to hear from the Architect This City community on this one.
How high are your ceilings? What do you consider ideal? Do you even care? And is there a ceiling height where it would become a deal breaker for you when it comes to buying/renting a new place? I also think your actual height might have an impact on preference, so it would be great to also hear how tall you are.
I have 10’ ceilings in my place. Not because my place is all that special, but because my suite is on the same floor as the building amenities. So the higher ceiling height is carried through (the rest of the building is 9’). I think it makes a big difference, particularly since my place isn’t all that big. I’m 6'3".
Let me know your thoughts in the comment section below. This is great market feedback that will certainly be taken to heart.
As further evidence that real estate is a local business, let’s take a look at the housing market in Japan today. It’s a very unique market.
According to this Freakonomics podcast, 50% of all single family houses in Japan are demolished by the time they reach 38 years old. That’s their half-life. By contrast, in the US, this number is 100 years.
The reason for this is rapid depreciation. Real property typically consists of two things: land and the building. Land doesn’t depreciate. But the structure sitting on the land does.
In Japan, the building or structure is thought to be fully depreciated (and therefore worth nothing) after about 30 years for a single-family home and after about 40 years for an apartment/condominium.
The result is that there’s virtually no resale housing market. When somebody buys a house, it is usually torn down and completely rebuilt. It’s a uniquely Japanese phenomenon.
So why does this happen?
The Freakonomics podcast presents a couple of hypothesis. Some believe that it’s caused by a Japanese fixation with newness. New is seen as pure and clean.
Others believe that it has to do with a building code that is constantly changing due to the high frequency of earthquakes in Japan. 20% of the world’s earthquakes with a magnitude of 6.0 or greater happen in Japan. And so there appears to be a belief that newer homes – with the latest seismic technologies – are the safest.
Whatever the case may be, the fact that there’s virtually no resale housing market in Japan, not surprisingly, produces some interesting outcomes. For one, maintenance and DIY home projects are uncommon. Why invest in your home when it’s not viewed as an asset, but as a disposable good?
At the same time, people worry very little about marketability when they are building new. And this is a big reason why Japan is so famous for its radically designed homes. When you’re building only for yourself, you just do what you want.
But most importantly, some (such as Richard Koo, who is interviewed in the podcast) believe that this approach to housing is a huge “obstacle to affluence.” Without a functioning resale market, the Japanese don’t get the opportunity to build wealth/equity in the same way that other countries do.
Do you buy that?
On my way back from Philadelphia this past weekend I wrote a post called, The Philadelphia (real estate) story. It was about how opposite the market is in Philly compared to Toronto.
After writing that post and because of a discussion in the comment section, I started thinking about condo vs. rental apartment development across the US. Because unlike cities such as Toronto and Vancouver, it struck me that – outside of maybe New York and Miami – most U.S. cities are really not building a lot of for sale condos. And if you’re from Toronto or Vancouver, I bet that feels odd to you.
But what exactly is that number?
As of the first quarter of 2015, condos as a percentage of all new multifamily (apartment) construction in the US was only 5.5%. That’s a tiny number and is down from over 50% before the Great Recession, which means most cities in the US really are building mostly rental. Last year the US built 264,000 multifamily units across 11,000 buildings.
So why is that happening?
There appears to be a number of factors, according to a recent article in the Wall Street Journal.
There’s a supply side constraint:
Another obstacle cited by developers: construction loans. Matt Allen, chief operating officer of the Related Group, a developer based in Miami, said he can get a construction loan for roughly 75% of the cost of building an apartment complex. But lenders will cover only 50%, on average, of a condo complex’s cost because of the greater risk, he said.
There’s a demand side constraint:
As a result, the Federal Housing Administration, which backs mortgages made to low-wealth buyers, tightened its lending standards in a series of moves from 2008 to 2012. Under the new rules, in order for the FHA to insure mortgages in a given condo complex, at least half of the units must be owner-occupied and no more than half can be FHA-insured, among other requirements. For condo projects under development, at least 30% of units must be under contract for sale before the FHA will start backing mortgages there. Mortgage giants Fannie Mae and Freddie Mac tightened their standards as well.
And there are macroeconomic factors:
On the entry-level end, tepid job growth early in the recovery and the younger generation’s affinity for flexibility have fueled demand for rentals. Apartment rents are up nearly 16% since 2010, according to Reis Inc.
Notwithstanding the above, could this be a post-recession policy pendulum that has swung too far in one direction?
So why is that happening?
There appears to be a number of factors, according to a recent article in the Wall Street Journal.
There’s a supply side constraint:
Another obstacle cited by developers: construction loans. Matt Allen, chief operating officer of the Related Group, a developer based in Miami, said he can get a construction loan for roughly 75% of the cost of building an apartment complex. But lenders will cover only 50%, on average, of a condo complex’s cost because of the greater risk, he said.
There’s a demand side constraint:
As a result, the Federal Housing Administration, which backs mortgages made to low-wealth buyers, tightened its lending standards in a series of moves from 2008 to 2012. Under the new rules, in order for the FHA to insure mortgages in a given condo complex, at least half of the units must be owner-occupied and no more than half can be FHA-insured, among other requirements. For condo projects under development, at least 30% of units must be under contract for sale before the FHA will start backing mortgages there. Mortgage giants Fannie Mae and Freddie Mac tightened their standards as well.
And there are macroeconomic factors:
On the entry-level end, tepid job growth early in the recovery and the younger generation’s affinity for flexibility have fueled demand for rentals. Apartment rents are up nearly 16% since 2010, according to Reis Inc.
Notwithstanding the above, could this be a post-recession policy pendulum that has swung too far in one direction?
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