Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

Subscribe

  • Who is worried about Canada’s housing market?

    Atlantic Cities just posted an article on the world’s 5 largest housing bubbles. In descending order of real growth, they are:

    1. Israel
    2. Norway
    3. Switzerland
    4. Canada
    5. Germany

    Not surprisingly, Canada is on the list. There is, of course, lots of talk both locally and abroad about the stability and sustainability of our housing market. Here’s what the article had to say about Canada:

    “With real home price appreciation near 20 percent, Canada’s home price growth has been raising eyebrows. Bank of Canada governor Stephen Poloz doesn’t see a bubble, but others aren’t so sure. Climbing alongside housing prices have been levels of household debt, which surmounted 165 percent of income in the second quarter of 2013. (That’s not too far from where they were in the U.S. before it suffered its housing crisis.) And the Bank of Canada itself has even warned about risks posed by frothy condo sectors in big cities like Toronto. A few hedge funds, such as San Francisco-based Hyphen Partners, have even made high-profile bets on a Canadian housing bust. They haven’t paid off, yet.”

    And here’s the full list of countries:

    image

    Overall, it’s not surprising to see that Canadian home prices have risen so dramatically since Q1-2009. As the US sank into deep recession (2008-2009), Canadian credit became cheap in order to stave off a recession of our own. This fuelled the housing market, which is an asset class that’s inextricably linked to financing costs.

    The same thing happened in Ireland, which today sits at the bottom of the above list. It has seen real prices drop roughly 40% since Q1-2009. By adopting the euro currency, Ireland no longer had control over its own monetary policy (this is one of the downfalls of a centralized currency). So when the economies of the larger continental countries stuttered, interest rates were dropped. For the strong Irish economy, it ended up creating a housing bubble.

    I worked in Ireland in the summer of 2007 and I remember people telling me about this. Already at this point there was concern that the market had become overheated. There are obvious parallels to what has happened in Canada, even though we don’t share a common currency. The Canadian and US economies are inextricably linked.

    So will the same thing that happened to Ireland happen here in Canada? Nobody knows for sure, but I think we can take comfort in the actions taken by the feds to tighten up lending. They’re acutely aware of what easy credit has done to the housing market and they’re trying to temper it. And it’s certainly had an impact.

    Early this week when I was on the panel about investing in condominiums, I asked a lot of the realtors about what they were seeing in the residential marketplace. A great number of them told me that their clients were struggling to obtain financing. A lot of deals were falling through because of it.

    If you’re worried about our housing market, this should be taken as great news. Choke off credit and you choke off real estate.

  • Video: Detroit just needs 10 years

    As some of you know, I was recently in Detroit. I went to check out the city because I heard about all the positive things that were starting to happen. Well here is a video that does a good job of summarizing some of that momentum.

    The first lady being interviewed in the video is Sue Mosey. She’s the president of Midtown Detroit Inc., which is a highly influential community development corporation. As a result of this, she’s become affectionately known as the “Mayor of Midtown.”

    I actually stayed in her B&B called The Inn on Ferry Street. I would highly recommend it if you’re looking for an affordable boutique place in Midtown Detroit.

    The video ends with everyone saying that they think Detroit needs 10 years before we’ll really see it come back. That actually doesn’t feel that far away.

    Credit goes to Alex Feldman for sending me this video. Thank you.

  • What the St. Lawrence Market neighbourhood looked like the 70s

    This week was the first public meeting for the revitalization of Berczy Park in the St. Lawrence Market neighbourhood of Toronto. I wasn’t able to attend the meeting but, as a resident of the area, I am interested in the project and will be following.

    In browsing through the project’s site, I came across an incredibly depressing photo of the St. Lawrence area from the 1970s. Here it is:

    image

    The empty greenish plot of land in the foreground is where Berczy Park sits today. The building at its point is the Flatiron Building, which is easily one of the most photographed buildings in the city.

    What’s obviously remarkable about this image is just the sheer number of surface parking lots. There is no neighbourhood, really.

    But even more depressing is the fact that all of this was seemingly deliberate. We tore down buildings to make way for all those parking areas. And that’s always upsetting. Here’s a photo of the same area in the 1920s (the Flatiron Building is at the bottom right):

    image

    It just goes to show how planning ideologies change.

    But to our credit, look how far we’ve come since the 1970s. Today, the St. Lawrence Market neighbourhood is one of the most vibrant downtown neighbourhoods. It’s become a model for mixed-income urban renewal – both here and abroad – and it continues to see strong investment.

    So while we screwed it up before, we are making amends.

  • Panel: Investing in Condominiums

    I sat on a panel tonight for a discussion on investing in condominiums. It was organized by the Six Degrees Real Estate Mixer group.

    My overall position was that we’re now returning to a more balanced market. The days of massive appreciation and overnight riches are gone. But that doesn’t mean we’re going to see anywhere near the correction that the US housing market saw in 2008.

    What I do think it means is that everyone – from developers to small investors – needs to remain focused on fundamentals. Buy quality assets in great locations and make sure the rental income is there. Cash is king. That’s fundamentally what the real estate business is about.

    Overall, the data shows that developers are pulling back with respect to releasing new product to the market and that price appreciation has slowed, almost trading sideways. All of this is good for the market if you’re worried about a catastrophic crash.

    I think the experience in the US has made us all paranoid about our own housing market. But it could end up saving us from repeating their mistakes.

  • Keeping a journal

    When I was in grade school at the Toronto French School, I had an English teacher named Mr. Hoad (spelt correctly, I hope) who used to make us all keep a journal. We were supposed to write something in it everyday. No exceptions. It could be on any topic. We just had to write. And we did this for years.

    Well, it just dawned on me that two decades later, I’ve come back to daily writing. I hadn’t consciously drawn the parallel until a friend mentioned to me that she used to “keep a journal”, but now it seems obvious.

    Of course this journal is much more public than the one I used to have (and I had volumes of them). This one is designed to provoke interaction and engagement. Journals are a great way to work through thoughts in your mind, but today technology has made them amazing forums for discussion.

  • Toronto needs a consistent taxi brand

    For the sake of our global brand, Toronto taxis need to have a consistent brand – the same car, the same colour. I’ve thought about this before and written about it somewhere, but it’s worth repeating.

    I was driving around downtown on Saturday night and I started to compare the ratio of cabs to non-cabs on the road. As is typical for any weekend night, most of the cars were cabs. And yet they’re a complete hodgepodge of different car types and colours.

    The cab companies, of course, like it this way. They want to be differentiated. But from a practical standpoint, does this even matter? Sure, I might call a specific company to pick me up somewhere, but when I’m hailing a cab on the street I go for the first available car. I couldn’t care less what company it is. 

    The result of this heterogeneity though is that we’re missing out on a valuable opportunity to brand our city. New York has its yellow cabs, London has its black cabs and all of Germany has its beige Mercedes Benzes. In our psyche, those cars symbolize those cities.

    Just like companies, cities today compete with one another for talent and capital. It’s been said many times before that the vast majority of Millenials now choose where they want to live (which city) before they even start looking for a job. Toronto needs to be on the top of that last.

    Taxi branding may seem like a small detail, but it’s not. As a comparison, take for example the Shangri-La Hotel company. The first time I stayed at one of their hotels was in Vancouver. I remember asking one of the staff members about the fragrance that seemed to permeate the entire building.

    He told me that it was the “Essence of Shangri-La” and that it was actually diffused throughout the entire building, as well as around the perimeter. The purpose of this was to give global travels a familiar feeling – that feeling of being home – wherever they are in the world. Now that’s consistent branding.

    Similarly, being in Toronto should make you feel like you’re here and in no other city. Our lumbering streetcars certainly help with that, but our cabs don’t. In a time where globalization is making cities feel more and more alike, we need to be doing everything we can in order to differentiate.

    Hell, in addition to having the same car and colour, maybe we should even create an Essence of Toronto scent for our cabs.

  • NOTL

    I was in Niagara-on-the-Lake last night for Stratus’ annual Harvest Party. It’s my second year going. But aside from their annual party, I probably visit the region a couple times a year.

    I like wine and I like supporting our local wine industry. I shop almost exclusively Ontario. I think a lot of people don’t realize how good our wines have become. The other reason I like going is because of the food. Good wine and good food go hand in hand. Stone Road Grille is one of my favourites.

    But Niagara-on-the-Lake is not a place where you’ll hear a lot of young people from Toronto going to frequently. And if you look at the town’s demographics, people over 65 years old make up about a 1/4 of the population. It’s growing as a place to retire.

    However, as Niagara’s prominence as a wine region grows, so will the town. Every time I go, I think about what could be done to improve the experience and attract a greater number of visitors.

    One thing I think would be a great addition is a well designed bike network. Wineries are of course very spread out, but wine tasting and driving make for an awkward mix. Let’s make it easier for people to get around on bicycle.

    I also think there’s an opportunity to brand the region as a food destination. Whenever you go to an event in Niagara, you discover all kinds of great local restaurants producing spectacular food, often using local ingredients. That should be promoted more.

    I’m sure many people like Niagara-on-the-Lake just the way it is. And it’s certainly a beautiful and enjoyable place. But I always like to think about how something could be made even better.

  • Highrise

    A friend of mine recently told me about a documentary that he thought I’d like. It’s called Highrise. And it’s an exploration of vertical living around the world.

    But it’s not your typical documentary. It’s a multi-year, multi-media documentary that I’m still in the midst of exploring. There’s videos, interactive web documentaries, blog posts and other stuff planned.

    If you’re interested in highrise buildings and cities, you can start here and here on the New York Times’ website.

  • Earth’s biggest ____store.

    Imagine this sequence of events (and don’t peak by clicking on any of the links).

    The year is 1994.

    You notice that the internet is starting to become a big deal and that more and more products are being sold online. As a result of this trend, you decide to start an online business.

    You write up the business plan and begin operations out of your garage. You then get lucky (or you’re just smart and talented). Within 2 months, sales reach $20,000/week. That’s over a million dollars a year.

    Business continues to grow and within 3 years you’re able to take your company public, raising $54 million at a $438 million valuation. Over the subsequent two years, you’re then able to raise an additional $2.2 billion in debt to fund your continued growth. 

    The year is now 2000.

    You were just named Time magazine Man of the Year. And traditional brick-and-mortar retailers are really taking notice (i.e. suing you). That’s pretty impressive after only 6 years of operation. 

    This company is called Amazon. And that “you” is Jeff Bezos.

    I was reading up about how much of an asshole Jeff Bezos is, and then became interested in the Amazon story. I thought I would share a bit of it with you all here.

  • Annual US Federal infrastructure budget

    I was browsing through Vishaan Chakrabarti’s new book, A Country of Cities: A Manifesto for Urban America, and I was struck by a diagram outlining the annual US Federal infrastructure budget. Here it is:

    It comes as no surprise, but it’s still a good reminder of how heavily subsidized roads and sprawl are. So the next time somebody argues that suburban sprawl is a natural market outcome, remind them of how much government encouragement it took.