Month: October 2020

Forecasting real estate hotspots requires the study of key market fundamentals, and in the Greater Toronto Area one of the main drivers is the millennial generation.

Entering their prime income earning years, millennials have changed the way of people live and work. Telecommuting, for example, was a novel concept a decade ago, but today it’s pushing brick and mortar offices into obsolescence. As working from home has become the new normal, millennials in particular are capitalizing on leisurely lifestyle opportunities.

“Millennials care about living balanced lives,” said Gary Silverberg, developer of Art Condos in Toronto’s trendy Queen West neighbourhood, and of Debut Condos in Barrie, which Silverberg identified as a new hot spot.

“The generations before them had a different idea of what work and play was; they didn’t have the same luxuries that this generation has created.”

Work-life balance is crucial for millennials and they’re leading an exodus out of cluttered, expensive urban centres towards their bucolic peripheries. No longer bound by 9-5 work schedules and hour-long commutes, people whose employers are headquartered in Toronto are working from places like Collingwood and Barrie, and in their spare time enjoying the outdoors, hitting ski slopes and dragon boating on Lake Simcoe.

And while the trend has been well established for much of the past decade, the COVID-19 pandemic has accelerated it.

“People are escaping to open spaces,” said Silverberg. “I’ve noticed people feel claustrophobic, especially with the lack of stimulation and entertainment offered in major urban cities like Toronto. They’re looking for things to mentally and physically stimulate them and they realize how important it is to make decisions based on other variables, so they’re rebalancing and recalibrating themselves according to what they deem important.”

Barrie, for its part, has seized upon its nascent urbanism and vast natural landscapes. Dunlop St. W., near its six-kilometre waterfront, is being rejuvenated, in part, by a massive $2.9 billion infrastructure investment from all levels of government, and the city expects 210,000 new residents in 10 years and 129,000 new jobs by 2041. Debut Condos, comprising two 33-storey towers with 272 units apiece, is the first residential high-rise development in Barrie—a location Silverberg didn’t choose on a whim.

“Barrie’s appreciation has just started,” he said. “The city has received a lot more recognition in the last few months and it’s evident in its downtown development. Downtown Barrie is a perfect mix of urban and nature.”

East of Toronto, Courtice, sandwiched between Oshawa and Bowmanville, is another example of millennials trading in citified surroundings for arcadia. The Uplands Courtice is a near sold-out luxury townhouse project that will be home to many an erstwhile Torontonian yearning for the tranquility of nature.

“It provides homeowners with the rare opportunity to connect with nature in the middle of suburban Courtice,” said developer Alan Hirschfield of High Street Courtice Inc. “In the last seven or eight months, a lot of millennial buyers have come to Uplands looking for a better quality of life and an affordable quality of life that’s not available in Toronto.”

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The strength of condominium investments in Toronto has diminished recently—first because of exorbitant carrying costs, and lately because of the novel coronavirus—but not only does selecting the right project buck those trends, it yields above-average returns.

Savvy investors have long been bullish about master-planned condo developments because of their rapid appreciation potential, itself a derivative of myriad conveniences just steps away from one’s door. Moreover, in a city like Toronto, where there’s a scarcity of master land plots, the appreciation possibilities become even more enticing.

Galleria on the Park is a master-planned community located near Dupont and Dufferin Sts. in Toronto’s west end, and it’s believed to be one of the city’s few remaining master plots of land. With the development’s third phase underway, investors are presented with an ace in the hole.

“From our perspective, as well as studying other master-planned communities, values typically increase at sharper rates than standalone condos because there’s existing or newly-built infrastructure that makes it a more well-rounded community in which to live,” said Dror Duchovny, vice president of marketing and asset management at ELAD Canada, Galleria’s developer. “The demand for these communities comes from having density, great public spaces, retail, and transit right at your doorstep.

“Historically, condo prices have grown about 5%, however, in the last five years this number has grown to over 20%. We believe in Toronto’s abilities to keep on this trajectory because all the fundamentals are here—housing supply shortage, immigration outpacing the city’s ability to deliver housing, and economic and employment growth.”

Galleria includes an amenity package replete with, among other things, co-working office space for residents, a grocery store, bank, and entertainment options. Not only will residents rely less on their cars, they won’t even need to travel on the TTC for essentials. As much as residents will benefit from amenities inside the Galleria community—which will see five more towers after the third phase—the Dupont Corridor will almost certainly see additional development, albeit of standalone condo buildings, and the added density will only enhance Galleria’s appreciation.

“At Galleria, you can live an urban and connected lifestyle, and benefit from transit and public infrastructure that’s already been built or is underway,” said Duchovny. “The opportunity to purchase a master-planned community that has 40% of its site dedicated to parkland is extremely rare. Typically, master plans of this scale are reserved for suburban or more peripheral downtown environments.”

Galleria is on a 24-hour bus route, close to Dufferin Station on the TTC line and the Union-Pearson-Express, which runs every 15 minutes.

Occupancy is slated for December 2025, giving the development years to appreciate before investors can secure rental income. As for whom Galleria will appeal to, Toronto’s housing shortage has arguably affected families the most, making low-rise housing cost prohibitive. Naturally, the city’s condo market took notice and started developing family-sized units outside of the downtown core, and Galleria’s commodious units and family-friendly amenities will ensure investors have no trouble finding tenancy for their units.

“We’ve planned Galleria with a wide age range in mind,” continued Duchovny. “We know the housing shortage has meant that families with urban sensibilities have been pushed out of the low-rise single-family market, but we don’t believe that means they shouldn’t benefit from an urban lifestyle. The new Wallace Emerson Community Centre will have daycare, a playground, swimming pool and more, and it will benefit from the City of Toronto’s programming for kids. The retail offerings at grade allow residents to walk to do their errands. The size and scale of this community allowed us to create something that’s not only for one buying demographic; it means that kids can grow up in a diverse, inclusive community. The lifestyle benefits from having your basic, everyday needs within reach make master-planned living ideal for busy urban families who appreciate the convenience of walkable, mixed-use communities instead of spending hours commuting, which cuts into family time.”

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Don’t believe the headlines—investing in Toronto’s real estate market is not a perilous venture. On the contrary, it’s a market ripe with opportunity.

Canada’s moratorium on immigration is largely to blame for housing demand contracting seemingly overnight, but, rest assured, the floodgates will when a COVID-19 vaccine is created and scaled. In fact, not only will pent up demand from immigrants suffuse Toronto’s real estate market, international students will return to the city as well.

Scott McLellan, senior vice president of Plaza Corp., remembers a similarly calamitous event quashing condo demand in Toronto, only for it to return with a vengeance.

“As soon as there’s a vaccine to control this, the pent up demand that will be released is similar to what we saw coming out of the ’08 recession, with the condo market exploding in ’09,” McLellan told CREW. “People are making buying decisions now because money is so cheap; interest and mortgage rates are at historical lows and I don’t know how much longer they will stay like that. People are getting a lot more home for a lot less money.”

In the interim, the costs of building materials and labour, among other things, have commensurately plummeted with housing demand, effectively presenting savvy investors with an opportunity to buy futures. According to McLellan, preconstruction condominiums are essentially selling at discounted price points, considering that, once demand returns, there’s nowhere to go but up.

“Once mills and production lines open up again, there will be demand to service,” he said. “Any time there’s demand with residential condos in the downtown core, the demand on labour escalates, as do prices. Supply and demand has a ripple effect throughout the whole building industry.”

Buying futures in the preconstruction market isn’t the only way investors can capitalize on the market’s nadir. Overleveraged owner-landlords have been competing with each other to offload their units because they can’t carry them without rental income, and therein lies an opportunity for investors looking to scoop up units on the resale market for what are tantamount to discounted prices.

“There’s so much inventory in the rental segment—the last time I checked, it was well over 4,000 listings available in Toronto alone,” said Christopher Alexander, executive vice president and regional director of REMAX Integra’s Ontario-Atlantic region.

“If you can’t carry your unit without a tenant, you’re in for some challenging times, but there’s still a market for them and people are still buying them. Real estate is always a long-term play for investment and very rarely do you make a good return in a short amount of time, so you really have to take the long view in any kind of market because that’s when you see the greatest return. If I were an investor wanting to buy, now is a great time because there’s a lot of inventory and builders in preconstruction are willing to negotiate.”

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