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.

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Tag: altus group

  • Development approval timelines in the Greater Toronto Area

    Altus Group recently completed a study for BILD (Building Industry and Land Development Association) that looked at the various factors that might be contributing to housing affordability and supply issues here in the Greater Toronto Area. One area that they looked at was development approval timelines, and I thought these were two interesting charts:

    What this is suggesting is that approval timelines don’t seem to really vary based on project size. Whether you’re rezoning for 3-50 homes or 400-500 homes, it’s probably going to take you a similar amount of time. This in turn creates a strong incentivize to want to develop bigger projects. Among other things, it brings down the “number of days per unit” metric shown in this second chart.

    I have spoken anecdotally before about minimum project size inflation, and here’s some data to support why that is happening. But it really is too bad. We should be doing more to incentivize smaller infill projects. Our cities need development at all scales.

  • Fees on homes

    A colleague of mine sent me this Bloomberg article today and said, “Here’s an article about things you already know.” The article cites a recent report by Altus Group that compared government-related fees on new housing across Canada and the U.S. What they discovered will not surprise any of you who are in the industry: Toronto has some of the highest government-imposed charges on new homes.

    For new condo apartments, the report found that government charges can add up to as much as C$124,582 per unit. That’s about 50% higher than the average unit in the U.S. and about 30% higher than the average unit in Canada (see above chart for the list of cities). While all of us in the industry can appreciate this, I don’t think most homeowners and tenants understand this. Hopefully they’re reading this post.

    Chart: Bloomberg

  • Price of a new condominium in Toronto increased 12.5% over the last year

    This morning BILD and Altus Group released their January 2019 new home sales figures for the Greater Toronto Area.

    Here are the highlights:

    • 1,362 new homes sold in January 2019 across the GTA. This is up 14% compared to last January.
    • Of these, 942 (~69%) were condominiums (includes low, mid, and high-rise, as well as townhouses). And 420 (~31%) were single-family homes (includes detached, semi-detached, and freehold townhouses).
    • Condominium sales volume is sitting only about 5% below the 10-year average and the benchmark price increased this month to $803,638, which represents a 12.5% year-over-year increase.
    • On the other hand, single-family home sales are down about 53% from the 10-year average and the benchmark price decreased by about 8.1% compared to last year. It is sitting at $1,130,046.

    While there continues to be a bifurcation in the new home market, we are seeing improvements across the board and the data is consistent with Altus’ prediction that 2019 will see an increase in overall sales.

    It is also important to consider how geography might factor into the above numbers. Here are the January sales numbers for the last three years broken down by region within the GTA:

    Just under 80% of the new condominiums sold last month took place in Toronto, whereas only about 1.2% of the single-family homes sold last month took place in the city. You can count them on one hand. There were only 5.

    So rather than just look at this in terms of housing type, I think the other way to interpret the data is that it could suggest strong and continued demand for centrally located and transit-oriented communities.

    And that just so happens to translate into a condominium.

    Photo by Eugene Aikimov on Unsplash

  • New high-rise home prices up 39.5% year-over-year

    February data (2018) for the new home market in the Greater Toronto Area was released this past week by BILD and Altus. I seem to have gotten into the habit of writing about this every month.

    The benchmark price for new low-rise single-family housing was down slightly from January to $1,219,874, but still up 12.8% from a year prior.

    The benchmark price for new high-rise housing was up a whopping 39.5% year-over-year to $729,735. But part of this is being driven by an equally dramatic increase in average unit sizes.

    Here is the relevant graph:

    image

    The story continues to be about tight supply, historically low developer inventories, and a lack of affordable low-rise product. 

    As I have argued many times before on this blog, I believe these factors — and in particular the last one — are, at least partly, driving this recent pop in high-rise pricing. People are priced out and now searching for substitutes.

    So my prediction continues to be that we will see a convergence (i.e. diminishing spread) between new low-rise and high-rise pricing.

    That will also bring about design and product changes on the high-rise side.

  • The year of the condo

    Over the past 5 years or so, real estate headlines in the Greater Toronto Area have often focused on the rapid appreciation of low-rise housing. High-rise housing simply wasn’t appreciating at the same rate – at least in aggregate terms.

    But 2017 has brought a different story. 

    If you look at BILD’s “New Homes Monthly Market Report” (data provided by Altus Group as of July 2017), you can see that high-rise pricing is now on a similar trajectory to low-rise pricing.

    Here is that graph:

    image

    This sharp uptick in pricing is also apparent when you look at the average price per square foot of new high-rise inventory. As of July, it was $764 psf across the GTA. See below.

    At the same time, average unit sizes have also jumped up to 871 square feet. So not only are new high-rise homes becoming more expensive on a normalized basis, they are also getting bigger, which further increases prices.

    image

    I recognize that we’re only seeing data up to the end of July, but, from the looks of it, 2017 is shaping up to be an extraordinary year for the condo.

    Of course, part of the reason this is happening is because remaining inventory for both low-rise and high-rise product is hitting 10-year lows. We’re back to the topic of supply.

    If you’re curious how some of these numbers have changed from the month prior (June 2017), check out this post.

  • Low-rise vs. high-rise

    Yesterday I sent out this tweet, which included this graph:

    The chart is from Altus Group and it is a monthly price index of new low-rise vs. high-rise housing in the Greater Toronto Area (GTA). I have posted similar charts in the past, but every time this chart gets updated the spread widens and the market looks even crazier.

    Some people responded on Twitter by saying that this is clearly an indication of a bubble. I don’t know if that is the case. 

    But, as I have said many times before, I do believe that it tells a vivid story around supply. Low-rise housing is severely supply constrained in the GTA and high-rise housing is less so. That has helped to stabilize pricing in the latter case.

    Now, you could look at this chart and say that the pace of low-rise price increases is simply unsustainable. The market must correct. 

    But you could also look at it and say that the market is going through a fundamental shift whereby more and more families will start living up, as opposed to out – which should then translate into high-rise pricing trending upwards as unit sizes increase. This is where I think we are headed. 

    What do you reckon is happening?