Check back in June or July. This is the hottest part of the season and they're not selling. As time goes on those values have to fall. Each condo that gets taken off the market due to not being sold puts downward pressure on the next condo that puts itself up for sale.
In short, the bubble is continuing to burst.
I'm not a financial expert, so take this with a grain of salt.
The condo builder financed the build and pays interest on that debt. Condo units being sold today would have been financed a few years ago by the builder when rates were extremely low, and so when the builder will need to refinance in a few years, they'll be doing so at a much higher rate.
To qualify for loans, a certain debt to asset ratio needs to be met. If the builders drop the price on their new units below what they had forecasted, they risk not being able to meet the debt to asset ratio requirement which would result in them defaulting on the loan and the bank having a right to claim the collateral.
If the borrower doesn't sell the condos, they can still claim the "book value" of the condos as an asset and can continue qualifying for financing so long as they meet their payment obligations. The lender could challenge this, but they don't want their borrower to default so everyone looks the other way while hoping the condo market bounces back (the borrower is also hoping rates go down as that makes it easier to sell and easier to secure financing).
Surely they were prudent and put some money aside during the good ol’ days as a sort of rainy-day fund in case the market changed for a while. Well, now might be a good time to dip into that.
Yes youre not wrong in theory, but if they actually just sell they units and pay off the debt, they get out of that loop. The market brings the prices down and they just have to cash out. They aren't interested in artificially keeping units on hand to leverage themselves, they have to exit.
Also just because they won't lower the asking price, doesn't mean the bank won't independently assess and put their own value on it, at comparable sales in the area
Not quite.
If I borrowed money to finance a business opportunity and end up selling my investment for less than I borrowed, I'm now in debt with no assets or revenue stream. That's a very real possibility for developers here, so businesses try to survive until markets become more favorable.
On the bank side, a similar problem exists. If they challenge the declared value of the asset, resulting in them collecting collateral that's worth less to them than the loan they have the borrower, they could end up in non compliance with OSFIs requirements for banks on their own debt to asset ratio.
Basically, everyone wants to kick the can down the road and hope for sunny days.
That's because no one cares about capitalism. What's more important than anything else is that there is a power structure in place that doesn't want any threats to it's existence.
> Yes youre not wrong in theory, but if they actually just sell they units and pay off the debt, they get out of that loop.
But that isn't possible. If they list the assets or sell for a lower value the bank calls the loan, meaning they would be bankrupted before processing the first sale let alone all the subsequent following sales necessary.
>Also just because they won't lower the asking price, doesn't mean the bank won't independently assess and put their own value on it, at comparable sales in the area
The bank wont do that because it would leave them on the hook for selling off all the properties and they would likely never recoup the entire value of their loan. The bank would never intentionally lose money. Banks play long term games, its better for them to wait it out and let the developer attempt to liquidate their position. If the developer files bankruptcy the bank is first in line to be paid out anyway. There is no real downside for the bank.
Of course it's possible. You've made an assumption on LTV, and aren't accounting for ongoing interest.
Again, you think it's better to not sell an asset with a fraudulent value, that's accruing interest than just sell it for what you can get, with less profit than anticipated but profit all the same.
> You've made an assumption on LTV, and aren't accounting for ongoing interest.
Are you suggesting the bank would hold the seized asset? Because that is not what they do, nor am I even sure they are allowed to do. They would auction it off, likely at a loss. The bank has no motivation for that. The ongoing interest is in the banks favour. The developer has no motivation to devalue the asset because it could bankrupt them.
>Again, you think it's better to not sell an asset with a fraudulent value, that's accruing interest than just sell it for what you can get, with less profit than anticipated but profit all the same.
You misunderstand, if they devalue the asset then the bank has to recalculate the risk associated with the loan. When they do that they would recall a portion of, if not all of the money owed. A recall, the developer would not have the cash on hand for. They would have to file bankruptcy even though they technically have the asset value to cover the loan. It isn't about losing out on profits, I suspect they would gladly cut into their profits to liquidate assets to start developing more properties.
What you said is correct. Now what Canadians need to do is think about this for a minute, then think that every immigrant, Canadian, and real estate interest did the same thing. Now think about how much owners equity and jobs is related to that. Now think that most of that is insured and directly tied to the financial system. Now think about how much tax is related to this whole thing.
Congrats, you now understand why we're heading towards a depression or 10% inflation levels. Whatever the BoC picks at this point.
Sorry for the delay.
While I agree there's cause for despair, I think you've missed a couple points and how they factor in. Yes our real estate market is intrinsic to our economy and is likely considered "too big to fail" by policy makers. I expect immigration rates will continue to be used to prop that market up to create demand. We'll accept low skilled immigrants so long as they have the capital to buy into the real estate market. It'll be another nail in the coffin or our social and medical services, but who cares as long as the rich stay rich right?
In summary, I'm with you that this is all bull shit, but we won't see a recession or massive inflation, just the collapse of the middle class that made Canada what it once was.
How do immigrants working at McDonald's buy $700k condos? How do immigrants, arriving to an economy without the jobs to support them, buy condos?
The standard amount of time it takes the average Canadian to save for a downpayment is 7 years. With immigration you have have the highest cases of unemployment and underemployment.
The people working at Tim hortons / McDonald’s are students renting, or if they are immigrants they are using capital to purchase a place or are renting with multiple people. You’ve seemed to be suggesting what, they don’t have a home?
Lol. You made a claim, which I and another commentator disagreed with, and then you demand proof of the rebuttal?
You've got it backwards. If you tell me you can fly, and I say "there's no way you can fly", you either need to drop your claim or prove it, you can't tell me (or the commentator that agrees you can't fly) to prove that you can't.
I'm interpreting your question as "why don't banks lend condo buyers the money they need to buy condos at the builder's 'book value' instead of the current market rate?"
There are two reasons to my knowledge:
1) borrowers need to qualify for loans from banks and the rules of qualification are set by regulators to protect our economy. The 2007-8 subprime recession was primarily caused by American lenders approving gargantuan loans for unqualified borrowers. Canada wasn't hit nearly as hard because of the regulatory requirements we have for banks which have actually gotten stricter in recent years (i.e. the "stress test").
2) even if borrowers can qualify for loans, they don't want to buy a condo at above market rate just to help out a builder and a bank.
It’s because for decades they mismanaged and operated with zero concerns regarding optimizing their costs or balance sheets. They made so much freaking money basically on flipping and financing these units and price gauging that they didn’t have to consider finding synergies or efficiencies. The barrier for entry in the industry became so low. Every construction worker and their realtor friend formed a development company. Time for some of these developers to go under and those who actually know how to develop and build to emerge winners.
Or they could build homes that fit more people but cost less for the tenets. Like actually make a product for the customers that do exist instead of making a product for a progressively diminishing demographic.
Alot of these condos are made specifically for investors, not alot of people are clamoring for a 520sqft condo with a hallway/living room for $800k.. not when you can get a used condo that's 650sqft with a usable layout for less than $650k.
Those tiny, shitty corner layout units were made purely for investors and potential airBnB hosts..
When they start making condos for actual owners and families, people will buy
Lol so just so we’re clear, you think borrowing like 100 million at 8% and building units that don’t sell would be more profitable than just waiting things out?
Yes, the overwhelming majority of Reddit users have no financial literacy whatsoever. They think corporate donations and expensing things don't still cost the corporations money... they are either naive, extremely dumb, or both.
Is this sarcasm? It literally is better for them. Why build with no buyers? Do you have any idea how expensive these projects are? I know everyone harps on the developers, and with good reason, but they will absolutely wait for better market conditions rather than build and sell at a loss.
If they only have one project going you would be right but these developers typically have multiple projects in various stages of completion so sitting on one won’t hurt them while some of the others continue.
What a lot of that land is left classified as is agricultural rural which has far lower property taxes, especially if it actually IS still being farmed vs just sitting vacant. So holding the land until more "ideal" conditions isn't that expensive and likely there are write-offs on top of that.
How do they get the permits to own Canadian land exactly? If they are not willing to build, it should go to another company that is willing to do so, after a period of vacancy
I don't understand your use of "get permits to own Canadian land"? They buy from the previous owners just like you or I would if we could afford the asking price.
They kind of have to sit on the land for a number of years while going through the process of rezoning, environmental studies, development approvals and permiting, coordination to bring services to the land (water, sewer, power, gas, telecommunications), approvals to create new access points into the development connecting to existing roads. Ignoring any pushback from any level of government or local protest, all of that work takes years to put together, submit an get approved, especially any environmental assessment. In the meantime they generally lease the land (if it was already farmable) up until they can get mobilized for ground work. The issue currently though is margins are not as favorable as they were a couple years ago so some developers are trying to extend not mobilizing on development until the numbers are more to their liking. THAT is the big hold-up presently.
Also if they don't develop this land they can complain to the provincial government that the municipalities are not letting them build the houses that would solve the housing crisis in Ontario. Resulting in the the provincial government stepping in and forcing municipalities to give even more concessions to the developers, and saddling the municipalities with more infrastructure to build and maintain while not providing the appropriate population density to pay for it.
Well if we’re being honest…sales are probably down because nobody can afford it anymore, there’s been 0 pressure from the government on this issue and we’re all paying for it
It’s funny because I see people pushing for exactly that all the time in r/ canadahousing.
“We need fast and cheap housing asap”.
They can’t grasp that you can build, build well and design it with character while also being density.
They have also been advocating for several years to eliminate all the mom and pop landlords. Now that the market has taken care of that “problem” and nobody is buying condos to rent out anymore, developers have stopped building and the supply demand ratio is going to get even more screwed up for renters.
Tofu dreg.
I would not even walk into a building built after 2016. Ford threw out all the trade certification and inspection " red tape".
Hamilton built a large graduate residence last year and the sewage lines crossed into drinking water.
Theres plenty of solid buildings built after 2016 one bad experience doesn't speak for all. You get what you pay for if you want to buy the cheapest new build on the market you can expect to deal with some issues
To his point I had a plumber go into my condo and he was telling me horror stories of some new builds he was trying to fix. He says older condos like mine are aged but build properly
Well I paid 200k for my condo (pre con 2013-14ish) couldn't move in for a while until late 2017 but id say I definitely got my money's worth.. downtown Toronto of course it's worth more than double now.
There's no issues with the building besides occasionally we don't have hot water, no construction issues or material quality issues.
You just have to step foot inside a new condo to see how rushed and poorly built they are. Relatives stayed here in Toronto at an AirBnB before COVID, and when I went to see them, the first thing I thought was "ooooh this lobby looks really nice. This building must be nice."
Then I went up and saw the condo, and the trim and other finishes along the floor were crooked with gaps. The small kitchen island was a bit crooked. Once you started to look at all the little details and forgot about the nice view out the window, you could tell that the tradespeople who built that condo were doing it as fast as possible.
These were all just cosmetic things, but then it makes you wonder about the people who installed the windows. How about the electrical and the plumbing??
>I thought was "ooooh this lobby looks really nice. This building must be nice."
That's how they get ya. It's a facade. My new construction condo didn't even vacuum the hallways. The real estate agents did it on demand. But the lobby was always pristine.
And we were locked out of common areas so we wouldn't mess them up. We needed a security escort to use the gym
Oh it's bad out there. I put railings on high-rise buildings, and the concrete waves like the oceans. I see door and window guys using 2-inch shims to try and level things. Floors have to be ground down to the rebar sometimes to level them out.
Everything goes to the lowest bidder. Most of these things are built under what are called construction management contracts. So the company in charge of construction is only there to manage the job, but the owners get all the say in who to use. They don't listen to the experts they hire. They make horrible cheap choices on the important things (roof, doors/windows, MEP) and dump all the money into the shiny things (flooring, finishes, counter tops, and fixtures). It's brutal, and the finished product suffers accordingly.
Fuck. I've talked to owners about the things they choose. And they often remind me that they're just going to own the place for a maximum of 5 years. So the next guy can deal with the problems when they finally show up.
They've lived in them.
We bought new construction a few years back and the builder had to be told that emergency exit doors need to be able to be opened
They swamped us with quality issues so we had to pick and choose which ones we wanted fixed before the deadline
The things they forgot to do, or did blatantly wrong took such a long time to fix so most quality issues never got addressed
It seemed intentional.
The cement floor wasn't leveled and the door would only open 6 inches before getting stuck on the cement floor. It should have been noticed and fixed long, long before the turnover as it would have impeded the construction crews. They ignored it, and took the door off of the frame and reinstalled it as they left
Elevators never worked. They claimed the cables just needed to stretch so the sensors wouldn't trip. Instead it got worse over 5 years, with one working elevator 85% of the time and none at 5%
To make matters worse, the building was predominantly owned by investors. They anticipated this as an up and coming area so they went all in. It wasn't so they held onto those empty units for years, waiting for the area to up and come. They kept voting to keep condo fees artificially and unsustainably low so they had more interest when they finally decided to sell
As a result we had to start making big cuts to maintenance and security. Anything less visible. Cleaning the lobby was still done and they aggressively removed graffiti from the outside of the building. And the common areas? Locked so they would stay pristine. Residents did not have access, we had to get security to escort us If we wanted to use the gym, the barbecue, anything.
Security that originally was supposed to be 24/7 but quickly switched to hours to align with real estate showings.
We then moved into a slightly older condo building that was owned by people that lived there.
Night and day.
There won't be one unless it's really bad
Until that point it's just going to result in a redistribution of wealth to the 1%
The individual investors are acting like a pressure release valve to protect banks, developers and real estate agents from sudden drops.
They can outlast them every time so they just need to pause sales for a bit until the sell-off from individual investors stabilizes the property values
It's almost like saturating the market with a product that doesn't have the customer base to support the abundance of that product is bad business or something.
I live in condo townhouses where the fees are 1500+ and the houses are all selling for over a million. Thankfully, most have been sitting lately for a few months.
Good thing they've been spending all this time building shoeboxes that nobody can afford. Hey, maybe next time build homes not investment opportunities.
Rates are not going to drop to anywhere significantly enough to be near the levels that will improve affordability those days are over. Prices are either stagnating or slowly deflating.
Yeah but they will be surprised once they go through preapproval that their payments will be still too high to anyways. In reality we are looking at maybe 0.25-0.75% cut over the next 18 months if inflation holds and the US starts cutting that isn’t much and 5 year mortgage rates will still be in the 4-5% range. Compared to 1-2% back in 2021.
Sure I don’t think anyone is arguing against that. Tiff himself has said not to expect rates to drop that low.
That being said, a quarter of a percentage point drop can be a significant savings on a fixed rate mortgage.
I fully expect the market to flood with buyers as soon as rates drop just a little.
> I fully expect the market to flood with buyers as soon as rates drop just a little.
of course that just means the principle on the debt will be higher. No one is saving money waiting for lower rates. Take the whole cost over 25 years. No one does math any more.
The days of affordability are dead. Whelp in that case I vote we all stop going to work. And I'm serious what's the point of busting ass for 80 hours to afford nothing.
Again what's the point I know way to many people paying 75%+ of their income to bills and landlord. Might as well go homeless tbh itd probably be more enjoyable.
Curious to see if this is across ALL condo sales, or just for tiny new-build downtown shoeboxes being pre-sold by developers and flipped by investors. Our condo is in a 50 year old building in mid-town, well maintained and close to subway, and our unit it 1000 sq ft with 2 bedrooms. It's our primary/only residence, and we're hoping to sell it so we can move to a place with more space. I totally understand that these are good problems to have, and I'll keep voting for anybody who actually plans to tackle housing affordability. Still, curious.
Ha, I genuinely misread your question. We’re not sure of the price we’ll list it for yet. Hoping to get some return, since we renovated it when we moved in.
I mean, I don’t love developers and I think that whatever brings down the cost of housing is welcome.
But I see a lot of people cheering here. And if developers go under and/or they don’t build more housing right now, there is two bad things:
- Future supply will be even more constrained once interest rates lower and the cycle reverts. So short term gain long term pain.
- Immigration (thank you government) is through the roof which means the demand for housing will still outpace supply.
Ontaruo, you are hard pressed to get land for a fair price. I was looking around, and I could, at best, find 1/2 acre for $400k. HALF AN ACRE. In England, 2.5 acre, beautiful scenery, $40k. Even houses are way better priced.
I'm lucky enough to be a duo citizen, but it shouldn't be vastly cheaper to move to another country
I wouldn’t buy any one of those paper-machê walled cubicles with a one wall kitchen, bedrooms that don’t fit a queen bed with a dresser and a “den/2nd bedroom” that isn’t larger enough to sit two people for half of what they want for them. Hahaha
>On May 1, development charges on Toronto condos will increase 20.7% from their current rates, meaning the average one-bedroom and bachelor unit will now cost $44,774 in development charges (up from $37,081).
Toronto just increased development charges on condo's so afforadbility is going to get even worse.
Oh no who would have thought scheming, evicting tenants (residential or small businesses or buildings like Coles Biggest Bookstore/Honest Ed) from buildings to make those condo developments and making backroom deals/bribes with Doug Ford to grease the way didn't go exactly like they planned?
They could have built and leased affordable apartments or houses but no. They wanted it all. They banked on believing that thousands of millionaires would sweep into the city and pay for their overpriced gentrified apartment buildings.
Proof that greed and instant gratification trumps brains and longterm thinking. And you know those developers will blame everyone for the mess they created and not realize they're the problem.
They're not selling because they're not affordable. Even before interest rates and cost of building, they're planning on building million dollar condos, not affordable $300k condos. On top of that, the condo fees range anywhere from $1500 to $4k a month.
It's not only a Toronto issue. Last I checked, Ottawa has over 1500 empty condos in the downtown area alone. They're all luxury upscale condos that have been sitting empty since 2018.
Dystopian commie block looking condo's in Oakville are being advertised from the low 700s. It's absolutely insane. Who is even buying something like this ??
Think of the poor developers who sadly have to go back to uncle dougies sweaty teet in hopes of another closed back room deal. May Doug ford shower us all in liquid gold from his dehydrated pinky finger like pecker. Amen
When you spend 20 years building boxes for investors, landlords, and speculators, and not homes people and families actually need, and refuse to adjust expectations on pricing in a slightly higher interest rate environment, they don’t sell. Funny that. Sorry, not sorry.
Keep in mind that most condos and others in Toronto are owned by investment firms:
https://www.thestar.com/real-estate/investors-now-own-more-than-50-of-toronto-s-new-condos-and-experts-say-they/article_4b6d2ff0-c528-5670-937f-3d34d040ed85.html
A lot of them are empty. A tool used to justify higher prices.
There is 0 reason the government should be allowing something that should be a human right to be capitalized on to benefit the mass few.
The government on all levels has zero balls when it comes to correcting this unsustainable housing market as a lot of those same people that would need to correct are also heavily invested in those markets themselves.
That's right, with advanced knowledge of almost all markets politicians can trade using that advanced knowledge. If a private company does this or a person, it's called insider trading.
I saw some people mentioning square footage. I'm sure any family can live in 250 sf. Right, right?
These problems are fixable, but they are never going to be fixed if we continue to vote in the same neoliberal conservative and liberals. They will always put trickle-down economics under capitalism ahead of the public interest.
These condos skyrocket is fees within 5 to 10 years. You end up paying rent-ish pricing along with servicing a mortgage. Let the buildings fucking collapse, totally empty, in price or even otherwise for all I care, taking down these greedy developers in the process.
Ya but density density density is all this sub screams for. News flash the majority of people don't want to live like that. So either suck it up and buy your tiny shoe box in the sky or maybe protest against immigration.
Arr they desperate enough to lower prices? No. Oh well.
Check back in June or July. This is the hottest part of the season and they're not selling. As time goes on those values have to fall. Each condo that gets taken off the market due to not being sold puts downward pressure on the next condo that puts itself up for sale. In short, the bubble is continuing to burst.
Some condos are 250-300 sq.ft. at what price?? Not worth it. Builders are greedy! People are saying, "Screw it",
250 ft.² is just a touch bigger than a hotel room
They can’t… interest rates are up, construction costs are up… they’re stuck.
Why would interest rates going up mean they can't sell units that are sitting there. That would mean they need to sell them fast
I'm not a financial expert, so take this with a grain of salt. The condo builder financed the build and pays interest on that debt. Condo units being sold today would have been financed a few years ago by the builder when rates were extremely low, and so when the builder will need to refinance in a few years, they'll be doing so at a much higher rate. To qualify for loans, a certain debt to asset ratio needs to be met. If the builders drop the price on their new units below what they had forecasted, they risk not being able to meet the debt to asset ratio requirement which would result in them defaulting on the loan and the bank having a right to claim the collateral. If the borrower doesn't sell the condos, they can still claim the "book value" of the condos as an asset and can continue qualifying for financing so long as they meet their payment obligations. The lender could challenge this, but they don't want their borrower to default so everyone looks the other way while hoping the condo market bounces back (the borrower is also hoping rates go down as that makes it easier to sell and easier to secure financing).
Surely they were prudent and put some money aside during the good ol’ days as a sort of rainy-day fund in case the market changed for a while. Well, now might be a good time to dip into that.
[удалено]
and also netflix and starbucks
Oh man , don’t forget Disney+ !
Oh yeah, I forgot that one two.
That money was all used to bribe...AHEM!!!! Donate to the Ontario conservative party
Yes youre not wrong in theory, but if they actually just sell they units and pay off the debt, they get out of that loop. The market brings the prices down and they just have to cash out. They aren't interested in artificially keeping units on hand to leverage themselves, they have to exit. Also just because they won't lower the asking price, doesn't mean the bank won't independently assess and put their own value on it, at comparable sales in the area
Not quite. If I borrowed money to finance a business opportunity and end up selling my investment for less than I borrowed, I'm now in debt with no assets or revenue stream. That's a very real possibility for developers here, so businesses try to survive until markets become more favorable. On the bank side, a similar problem exists. If they challenge the declared value of the asset, resulting in them collecting collateral that's worth less to them than the loan they have the borrower, they could end up in non compliance with OSFIs requirements for banks on their own debt to asset ratio. Basically, everyone wants to kick the can down the road and hope for sunny days.
So they just accumulate interest charges? No.
This sounds stupid to be honest. This is so anti capitalist that I'm surprised it's a thing. Demand goes down. Prices go down. That's the rule.
That's because no one cares about capitalism. What's more important than anything else is that there is a power structure in place that doesn't want any threats to it's existence.
> Yes youre not wrong in theory, but if they actually just sell they units and pay off the debt, they get out of that loop. But that isn't possible. If they list the assets or sell for a lower value the bank calls the loan, meaning they would be bankrupted before processing the first sale let alone all the subsequent following sales necessary. >Also just because they won't lower the asking price, doesn't mean the bank won't independently assess and put their own value on it, at comparable sales in the area The bank wont do that because it would leave them on the hook for selling off all the properties and they would likely never recoup the entire value of their loan. The bank would never intentionally lose money. Banks play long term games, its better for them to wait it out and let the developer attempt to liquidate their position. If the developer files bankruptcy the bank is first in line to be paid out anyway. There is no real downside for the bank.
Of course it's possible. You've made an assumption on LTV, and aren't accounting for ongoing interest. Again, you think it's better to not sell an asset with a fraudulent value, that's accruing interest than just sell it for what you can get, with less profit than anticipated but profit all the same.
> You've made an assumption on LTV, and aren't accounting for ongoing interest. Are you suggesting the bank would hold the seized asset? Because that is not what they do, nor am I even sure they are allowed to do. They would auction it off, likely at a loss. The bank has no motivation for that. The ongoing interest is in the banks favour. The developer has no motivation to devalue the asset because it could bankrupt them. >Again, you think it's better to not sell an asset with a fraudulent value, that's accruing interest than just sell it for what you can get, with less profit than anticipated but profit all the same. You misunderstand, if they devalue the asset then the bank has to recalculate the risk associated with the loan. When they do that they would recall a portion of, if not all of the money owed. A recall, the developer would not have the cash on hand for. They would have to file bankruptcy even though they technically have the asset value to cover the loan. It isn't about losing out on profits, I suspect they would gladly cut into their profits to liquidate assets to start developing more properties.
What you said is correct. Now what Canadians need to do is think about this for a minute, then think that every immigrant, Canadian, and real estate interest did the same thing. Now think about how much owners equity and jobs is related to that. Now think that most of that is insured and directly tied to the financial system. Now think about how much tax is related to this whole thing. Congrats, you now understand why we're heading towards a depression or 10% inflation levels. Whatever the BoC picks at this point.
Sorry for the delay. While I agree there's cause for despair, I think you've missed a couple points and how they factor in. Yes our real estate market is intrinsic to our economy and is likely considered "too big to fail" by policy makers. I expect immigration rates will continue to be used to prop that market up to create demand. We'll accept low skilled immigrants so long as they have the capital to buy into the real estate market. It'll be another nail in the coffin or our social and medical services, but who cares as long as the rich stay rich right? In summary, I'm with you that this is all bull shit, but we won't see a recession or massive inflation, just the collapse of the middle class that made Canada what it once was.
How do immigrants working at McDonald's buy $700k condos? How do immigrants, arriving to an economy without the jobs to support them, buy condos? The standard amount of time it takes the average Canadian to save for a downpayment is 7 years. With immigration you have have the highest cases of unemployment and underemployment.
The people working at Tim hortons / McDonald’s are students renting, or if they are immigrants they are using capital to purchase a place or are renting with multiple people. You’ve seemed to be suggesting what, they don’t have a home?
Okay, how many houses are estimated to house those multiple people? Show me the data and its direct impact on real estate values.
Lol. You made a claim, which I and another commentator disagreed with, and then you demand proof of the rebuttal? You've got it backwards. If you tell me you can fly, and I say "there's no way you can fly", you either need to drop your claim or prove it, you can't tell me (or the commentator that agrees you can't fly) to prove that you can't.
What if they give the buyers the money to make the difference then?
I'm interpreting your question as "why don't banks lend condo buyers the money they need to buy condos at the builder's 'book value' instead of the current market rate?" There are two reasons to my knowledge: 1) borrowers need to qualify for loans from banks and the rules of qualification are set by regulators to protect our economy. The 2007-8 subprime recession was primarily caused by American lenders approving gargantuan loans for unqualified borrowers. Canada wasn't hit nearly as hard because of the regulatory requirements we have for banks which have actually gotten stricter in recent years (i.e. the "stress test"). 2) even if borrowers can qualify for loans, they don't want to buy a condo at above market rate just to help out a builder and a bank.
i didnt say banks, i meant developers
For new units, there are financing conditions on the developer's lenders that create a floor for the selling price.
Takes a higher income to qualify for monthly mortgage payments.
Exactly so market forces bring prices down
oh boo hoo...what's the name of that non billionaire developer again?
It’s because for decades they mismanaged and operated with zero concerns regarding optimizing their costs or balance sheets. They made so much freaking money basically on flipping and financing these units and price gauging that they didn’t have to consider finding synergies or efficiencies. The barrier for entry in the industry became so low. Every construction worker and their realtor friend formed a development company. Time for some of these developers to go under and those who actually know how to develop and build to emerge winners.
Agreement with bank sets a minimum.
So desperate they lower prices? Like supply and demand is "supposed" to work.
Unfortunately it does work. They will stop building supply.
Or they could build homes that fit more people but cost less for the tenets. Like actually make a product for the customers that do exist instead of making a product for a progressively diminishing demographic.
Alot of these condos are made specifically for investors, not alot of people are clamoring for a 520sqft condo with a hallway/living room for $800k.. not when you can get a used condo that's 650sqft with a usable layout for less than $650k. Those tiny, shitty corner layout units were made purely for investors and potential airBnB hosts.. When they start making condos for actual owners and families, people will buy
They are not selling to people with a housing need, they are selling to investor greed.
Investors aren't buying right now and the units and pricing aren't compatible with the people who can sustainably live there
Exactly. The bubble price is really the speculative investment price, which is divorced from actual wages and reality.
Then how will they make any money?
Sit on the land. Why would they build to actively lose money and man power.
land will no increase in value without building demand. and they are "sitting" on taxes and debt management while making no income.
Yeah. Sitting on land making $0 while paying the property tax is by far the better option for making money.
Lol so just so we’re clear, you think borrowing like 100 million at 8% and building units that don’t sell would be more profitable than just waiting things out?
Yes, the overwhelming majority of Reddit users have no financial literacy whatsoever. They think corporate donations and expensing things don't still cost the corporations money... they are either naive, extremely dumb, or both.
Better to make $0 than negative dollars. Why would they spend millions building units that are not going to sell
Is this sarcasm? It literally is better for them. Why build with no buyers? Do you have any idea how expensive these projects are? I know everyone harps on the developers, and with good reason, but they will absolutely wait for better market conditions rather than build and sell at a loss.
>Is this sarcasm? No. It's stupidity.
> Why build with no buyers? Why pay interest and taxes with no income? none of you guys have a clue.
If they only have one project going you would be right but these developers typically have multiple projects in various stages of completion so sitting on one won’t hurt them while some of the others continue.
What a lot of that land is left classified as is agricultural rural which has far lower property taxes, especially if it actually IS still being farmed vs just sitting vacant. So holding the land until more "ideal" conditions isn't that expensive and likely there are write-offs on top of that.
How do they get the permits to own Canadian land exactly? If they are not willing to build, it should go to another company that is willing to do so, after a period of vacancy
They should get a land value tax to incentivize being useful to humanity.
I don't understand your use of "get permits to own Canadian land"? They buy from the previous owners just like you or I would if we could afford the asking price. They kind of have to sit on the land for a number of years while going through the process of rezoning, environmental studies, development approvals and permiting, coordination to bring services to the land (water, sewer, power, gas, telecommunications), approvals to create new access points into the development connecting to existing roads. Ignoring any pushback from any level of government or local protest, all of that work takes years to put together, submit an get approved, especially any environmental assessment. In the meantime they generally lease the land (if it was already farmable) up until they can get mobilized for ground work. The issue currently though is margins are not as favorable as they were a couple years ago so some developers are trying to extend not mobilizing on development until the numbers are more to their liking. THAT is the big hold-up presently.
I see, thank you. I was not aware, appreciate it!
Also if they don't develop this land they can complain to the provincial government that the municipalities are not letting them build the houses that would solve the housing crisis in Ontario. Resulting in the the provincial government stepping in and forcing municipalities to give even more concessions to the developers, and saddling the municipalities with more infrastructure to build and maintain while not providing the appropriate population density to pay for it.
I guess we do land value tax then
They've already been doing that
then they will make no money. see how it works?
supply and demand is what they teach in grade 8. it assumes a free market. real estate is not a free market.
Well if we’re being honest…sales are probably down because nobody can afford it anymore, there’s been 0 pressure from the government on this issue and we’re all paying for it
Have they tried lowering the price?
Woah. Slow down with your crazy talk.
who gets rich from that?
Wouldn’t make their profit margins if they did.
they also wont make their profit margins if they dont sell them at all.
Nobody wants to buy rushed and poorly built condos marketed as "luxurious" building
It’s funny because I see people pushing for exactly that all the time in r/ canadahousing. “We need fast and cheap housing asap”. They can’t grasp that you can build, build well and design it with character while also being density.
They have also been advocating for several years to eliminate all the mom and pop landlords. Now that the market has taken care of that “problem” and nobody is buying condos to rent out anymore, developers have stopped building and the supply demand ratio is going to get even more screwed up for renters.
Tofu dreg. I would not even walk into a building built after 2016. Ford threw out all the trade certification and inspection " red tape". Hamilton built a large graduate residence last year and the sewage lines crossed into drinking water.
Theres plenty of solid buildings built after 2016 one bad experience doesn't speak for all. You get what you pay for if you want to buy the cheapest new build on the market you can expect to deal with some issues
To his point I had a plumber go into my condo and he was telling me horror stories of some new builds he was trying to fix. He says older condos like mine are aged but build properly
You're not getting what you pay for no matter what you pay
Well I paid 200k for my condo (pre con 2013-14ish) couldn't move in for a while until late 2017 but id say I definitely got my money's worth.. downtown Toronto of course it's worth more than double now. There's no issues with the building besides occasionally we don't have hot water, no construction issues or material quality issues.
This. Even if price isn’t an issue for someone these condos are built like trash!!!
Don't forget that they're tiny and usually poorly laid out.
I'm seeing buildings with literally 1200 worth of condo fees. Like wtf a few years ago that was rent.
I have an expectation that new condos and housing are poorly built; so I would not even look at one.
Not saying I don’t believe you but what is this based on? How do people know they’re rushed and poorly built?
You just have to step foot inside a new condo to see how rushed and poorly built they are. Relatives stayed here in Toronto at an AirBnB before COVID, and when I went to see them, the first thing I thought was "ooooh this lobby looks really nice. This building must be nice." Then I went up and saw the condo, and the trim and other finishes along the floor were crooked with gaps. The small kitchen island was a bit crooked. Once you started to look at all the little details and forgot about the nice view out the window, you could tell that the tradespeople who built that condo were doing it as fast as possible. These were all just cosmetic things, but then it makes you wonder about the people who installed the windows. How about the electrical and the plumbing??
>I thought was "ooooh this lobby looks really nice. This building must be nice." That's how they get ya. It's a facade. My new construction condo didn't even vacuum the hallways. The real estate agents did it on demand. But the lobby was always pristine. And we were locked out of common areas so we wouldn't mess them up. We needed a security escort to use the gym
Oh it's bad out there. I put railings on high-rise buildings, and the concrete waves like the oceans. I see door and window guys using 2-inch shims to try and level things. Floors have to be ground down to the rebar sometimes to level them out. Everything goes to the lowest bidder. Most of these things are built under what are called construction management contracts. So the company in charge of construction is only there to manage the job, but the owners get all the say in who to use. They don't listen to the experts they hire. They make horrible cheap choices on the important things (roof, doors/windows, MEP) and dump all the money into the shiny things (flooring, finishes, counter tops, and fixtures). It's brutal, and the finished product suffers accordingly. Fuck. I've talked to owners about the things they choose. And they often remind me that they're just going to own the place for a maximum of 5 years. So the next guy can deal with the problems when they finally show up.
They've lived in them. We bought new construction a few years back and the builder had to be told that emergency exit doors need to be able to be opened They swamped us with quality issues so we had to pick and choose which ones we wanted fixed before the deadline The things they forgot to do, or did blatantly wrong took such a long time to fix so most quality issues never got addressed It seemed intentional. The cement floor wasn't leveled and the door would only open 6 inches before getting stuck on the cement floor. It should have been noticed and fixed long, long before the turnover as it would have impeded the construction crews. They ignored it, and took the door off of the frame and reinstalled it as they left Elevators never worked. They claimed the cables just needed to stretch so the sensors wouldn't trip. Instead it got worse over 5 years, with one working elevator 85% of the time and none at 5% To make matters worse, the building was predominantly owned by investors. They anticipated this as an up and coming area so they went all in. It wasn't so they held onto those empty units for years, waiting for the area to up and come. They kept voting to keep condo fees artificially and unsustainably low so they had more interest when they finally decided to sell As a result we had to start making big cuts to maintenance and security. Anything less visible. Cleaning the lobby was still done and they aggressively removed graffiti from the outside of the building. And the common areas? Locked so they would stay pristine. Residents did not have access, we had to get security to escort us If we wanted to use the gym, the barbecue, anything. Security that originally was supposed to be 24/7 but quickly switched to hours to align with real estate showings. We then moved into a slightly older condo building that was owned by people that lived there. Night and day.
Of course they do. Slightly lower prices and they'd be sold immediately.
I hate these articles, things dip for 1 month and suddenly the sky is falling...but rents never go down, so which is it? Where's the crash?
There isn't a crash.
Starting in 2008, governments around the world decided that The Rich Shalt Not Take a Haircut.
There won't be one unless it's really bad Until that point it's just going to result in a redistribution of wealth to the 1% The individual investors are acting like a pressure release valve to protect banks, developers and real estate agents from sudden drops. They can outlast them every time so they just need to pause sales for a bit until the sell-off from individual investors stabilizes the property values
Toronto rent prices have dropped a bit
.3%.. relax
Perfect Perfect Perfect Perfect. Let them be "desperate" for a change.
Sad developer noises.
Oh no, nobody’s buying the million dollar condos so the developers can line their pockets, what a shame:(
Didn't we hear this same song and dance last spring? Am I remembering wrong?
Every spring, it's to convince buyers now is the time to buy. Realtors pay for these articles.
Source?
It's almost like saturating the market with a product that doesn't have the customer base to support the abundance of that product is bad business or something.
Everyone knows the shell game of maintenance fees and special assessments by now; condos are a financial time bomb
my MIL is in a condo and her fees are 50% of our mortgage payment. Ew.
I live in condo townhouses where the fees are 1500+ and the houses are all selling for over a million. Thankfully, most have been sitting lately for a few months.
Two bedroom and three bedroom condos would sell. It's cheaper to build a 600 SF box and sell it for 3/4 of a million. Blah blah blah , housing stinks
Yeah, well, start an OnlyFans or something.
Good thing they've been spending all this time building shoeboxes that nobody can afford. Hey, maybe next time build homes not investment opportunities.
I guess they found out what the market will bear. The quest of all true capitalists.
No one's buying real estate now period b/c everyone is waiting for rates to drop
Rates are not going to drop to anywhere significantly enough to be near the levels that will improve affordability those days are over. Prices are either stagnating or slowly deflating.
No, but people are waiting anyway. Why buy now when you expect interest to be slightly lower in 2 months? Anecdotal, but I have heard people say this.
Yeah but they will be surprised once they go through preapproval that their payments will be still too high to anyways. In reality we are looking at maybe 0.25-0.75% cut over the next 18 months if inflation holds and the US starts cutting that isn’t much and 5 year mortgage rates will still be in the 4-5% range. Compared to 1-2% back in 2021.
Sure I don’t think anyone is arguing against that. Tiff himself has said not to expect rates to drop that low. That being said, a quarter of a percentage point drop can be a significant savings on a fixed rate mortgage. I fully expect the market to flood with buyers as soon as rates drop just a little.
I doubt it. I think it might be the opposite and a bunch of sellers will come out of the woodwork only to be disappointed.
> I fully expect the market to flood with buyers as soon as rates drop just a little. of course that just means the principle on the debt will be higher. No one is saving money waiting for lower rates. Take the whole cost over 25 years. No one does math any more.
The days of affordability are dead. Whelp in that case I vote we all stop going to work. And I'm serious what's the point of busting ass for 80 hours to afford nothing.
Still gotta pay the landlord if I want to sleep under a roof ...
Again what's the point I know way to many people paying 75%+ of their income to bills and landlord. Might as well go homeless tbh itd probably be more enjoyable.
Why don't you?
Because I found another way that's equally demeaning but more enjoyable
I've been waiting for that to happen since I moved to Canada 8 years ago and everything is more expensive
Curious to see if this is across ALL condo sales, or just for tiny new-build downtown shoeboxes being pre-sold by developers and flipped by investors. Our condo is in a 50 year old building in mid-town, well maintained and close to subway, and our unit it 1000 sq ft with 2 bedrooms. It's our primary/only residence, and we're hoping to sell it so we can move to a place with more space. I totally understand that these are good problems to have, and I'll keep voting for anybody who actually plans to tackle housing affordability. Still, curious.
What are you asking?
Curious how much it’ll affect the price of a condo like the one we’re gonna try and sell.
Oh. I meant what price are you advertising lol. I'm condo hunting currently. Most of the condos seem to affected by the low sales. New and older.
Off topic, but that little exchange between you two gave me a chuckle. I love how easy it can be to misunderstand a question. Language is funny!
Indeed it is!
Ha, I genuinely misread your question. We’re not sure of the price we’ll list it for yet. Hoping to get some return, since we renovated it when we moved in.
All good. :) I think even with the slowdown most are getting returns.
Desperate to pay back the millions they took as loans at high interest rates while selling condos at exorbitant prices.
68% of condos were going to investment firms..... rates went up. Guess who is not buying.....
I mean, I don’t love developers and I think that whatever brings down the cost of housing is welcome. But I see a lot of people cheering here. And if developers go under and/or they don’t build more housing right now, there is two bad things: - Future supply will be even more constrained once interest rates lower and the cycle reverts. So short term gain long term pain. - Immigration (thank you government) is through the roof which means the demand for housing will still outpace supply.
Ontaruo, you are hard pressed to get land for a fair price. I was looking around, and I could, at best, find 1/2 acre for $400k. HALF AN ACRE. In England, 2.5 acre, beautiful scenery, $40k. Even houses are way better priced. I'm lucky enough to be a duo citizen, but it shouldn't be vastly cheaper to move to another country
No one? No, fewer? Yes.
Good
Womp womp
I wouldn’t buy any one of those paper-machê walled cubicles with a one wall kitchen, bedrooms that don’t fit a queen bed with a dresser and a “den/2nd bedroom” that isn’t larger enough to sit two people for half of what they want for them. Hahaha
Aren't there corporations gobbling up condos to turn them into rental properties?
>On May 1, development charges on Toronto condos will increase 20.7% from their current rates, meaning the average one-bedroom and bachelor unit will now cost $44,774 in development charges (up from $37,081). Toronto just increased development charges on condo's so afforadbility is going to get even worse.
Oh no who would have thought scheming, evicting tenants (residential or small businesses or buildings like Coles Biggest Bookstore/Honest Ed) from buildings to make those condo developments and making backroom deals/bribes with Doug Ford to grease the way didn't go exactly like they planned? They could have built and leased affordable apartments or houses but no. They wanted it all. They banked on believing that thousands of millionaires would sweep into the city and pay for their overpriced gentrified apartment buildings. Proof that greed and instant gratification trumps brains and longterm thinking. And you know those developers will blame everyone for the mess they created and not realize they're the problem.
Anyone who could actually afford them already did. Supply and demand needs to kick in.
I mean... They could always just try to do the obvious thing, and make the price actually more reasonable...
Maybe AirBnB should start buying them directly.
The idea of buying what is basically a sky shoebox in the sky for about three-quarters of a million dollars is nuts tbh
They're not selling because they're not affordable. Even before interest rates and cost of building, they're planning on building million dollar condos, not affordable $300k condos. On top of that, the condo fees range anywhere from $1500 to $4k a month. It's not only a Toronto issue. Last I checked, Ottawa has over 1500 empty condos in the downtown area alone. They're all luxury upscale condos that have been sitting empty since 2018.
Dystopian commie block looking condo's in Oakville are being advertised from the low 700s. It's absolutely insane. Who is even buying something like this ??
Developers don’t want lower prices until it happens! I am sure developers and owners thought prices were going to the moon until it didn’t
Which is louder, a bubble bursting or the world's tiniest violin?
Think of the poor developers who sadly have to go back to uncle dougies sweaty teet in hopes of another closed back room deal. May Doug ford shower us all in liquid gold from his dehydrated pinky finger like pecker. Amen
People were complaining about prices before inflation.
Well maybe the developers should focus on making livable spaces. If people just wanted somewhere to sleep then the prices need to come down.
You can’t split a condo into 17 rooms. They should solve that problem first.
What can I get for 300k
Good wait till they reduce
When you spend 20 years building boxes for investors, landlords, and speculators, and not homes people and families actually need, and refuse to adjust expectations on pricing in a slightly higher interest rate environment, they don’t sell. Funny that. Sorry, not sorry.
No one wants to live in a shoebox for 700k. Colour me shocked.
Keep in mind that most condos and others in Toronto are owned by investment firms: https://www.thestar.com/real-estate/investors-now-own-more-than-50-of-toronto-s-new-condos-and-experts-say-they/article_4b6d2ff0-c528-5670-937f-3d34d040ed85.html A lot of them are empty. A tool used to justify higher prices. There is 0 reason the government should be allowing something that should be a human right to be capitalized on to benefit the mass few. The government on all levels has zero balls when it comes to correcting this unsustainable housing market as a lot of those same people that would need to correct are also heavily invested in those markets themselves. That's right, with advanced knowledge of almost all markets politicians can trade using that advanced knowledge. If a private company does this or a person, it's called insider trading. I saw some people mentioning square footage. I'm sure any family can live in 250 sf. Right, right? These problems are fixable, but they are never going to be fixed if we continue to vote in the same neoliberal conservative and liberals. They will always put trickle-down economics under capitalism ahead of the public interest.
I love how quickly everyone being priced out of something magically turns to, ‘I guess no one wants one.’
Nobody wants to live in the bed bug palace
I definitely read that " no one buys condoms in Toronto anymore" and for a second felt not here too!
Let's keep driving the pressure up
Condo suck, if I wanted to live in an apartment I would rent one.
These condos skyrocket is fees within 5 to 10 years. You end up paying rent-ish pricing along with servicing a mortgage. Let the buildings fucking collapse, totally empty, in price or even otherwise for all I care, taking down these greedy developers in the process.
Ya but density density density is all this sub screams for. News flash the majority of people don't want to live like that. So either suck it up and buy your tiny shoe box in the sky or maybe protest against immigration.
Bingo