Will we ever see pre construction projects in the Toronto core for less than $1,500/per square foot (PSF)? It certainly doesn’t seem like it. Assuming the government maintains its aggressive immigration targets and city hall keeps the status quo on its inability to process development applications in a timely manner, there are 3 main catalysts outside of government involvement that will push prices further for existing condo inventory.
Catalyst 1:
The pricing gap between existing downtown condo inventory vs. new pre construction has been within a couple of hundred dollars on a PSF basis for the last couple of years. Since covid we’ve had supply chain issues, commodities shortages, freight increases, and an amplified labour shortage of skilled trades, everything is pointing to material increases in construction costs, which will have to be absorbed by the end consumer.
Catalyst 2:
Price for developable land in the core has increased drastically as there has been a rush since 2020 by developers to buy land that’s currently zoned/approved or about to be zoned and approved prior to the new Affordable Housing/Green Spaces policies that are set to take place in May 2022. Developers would rather pay a premium now for zoned land than to take on the risk of working with the new policies which as per some cost analysts are forecasted to increase hard costs for builders by at least 10%.
Catalyst 3:
Delays in approving developments – in gridlock. It’s hard to quantify the impact, for context Stephen Velasco has put a great visual together showing what’s currently approved to be built (Blue), and what’s proposed and is years out/if it ever gets approved (Purple).
With these escalating costs it’s likely that the existing resale condo market will get the attention of would be pre construction buyers if the gap between old vs. new inventory continues to widen as it’s currently projected.
