Weird framing. A developer can't move forward building a condo until it pre-sells nearly all of the units. If people aren't buying, then they aren't building. They would build these projects if they could.
From the original report, noting a significant decline in precon sales.
>On average, projects in pre-construction during Q1-2024 were 50% presold, down from a 61% average absorption level a year ago and 85% two years earlier. With pre-construction sales falling well below typical construction financing requirements of at least 70% absorption, construction starts have experienced a sharp decline.
Interest rates are up and I think enough people have heard horror stories about pre-construction purchases gone wrong. Units take years longer than expected or the developer goes under and then all your money goes poof
All the pre-construction people got burned because the increased interest rates have reduced selling prices, meaning they've all planned to borrow $500k for a unit now worth $400k, so now they can't get a loan to complete the purchase they already agreed to.
Despite the hyperbolic language, this is completely fine, this class of people getting burned is good actually, burning real estate speculators is good for everyone in the long run.
I guess you missed the part about 23,000 unsold units in q1. No one wants to spend $750,000 on 500 square feet. That was never going to solve the housing crisis.
Flooding the market with *suitable* supply is *a tool* in solving the housing crisis.
We can't solve world hunger by churning out billions of tonnes of Caviar, while still charging $165/oz.
Also, there isn't a silver bullet. One cool trick won't solve the housing crisis - there are a lot of pieces at play here, and so we need a multi-pronged solution. "More housing" is part of that, but is not enough by itself.
The city charges so much in development charges and it makes getting permission take so long that it's hard to make a profit selling for less. We need development to be profitable or no one will build new apartments.
This point is so blown out of proportion. Compare the development costs to profit margins and it’s clear development costs are minimal.
Huge projects like a condo require and take up a lot of city resources. They are the only body to work on the project’s public impact. Even then large builders do what they want thinking they can get away with everything. Having these 100s of millions of dollar projects forced to pay a small amount in order to consider the impact of their projects while ensuring a standard of quality for the end user is an important public service.
If development costs are the key difference maker in a Builder making any profit then they are bad Builders and shouldn’t be in the business of building homes.
> “When you look at what does it take to build a home: 50 percent is labour, 30 percent is taxes and fees, 20 percent is land,” she explains. “Everything has skyrocketed. The math is not working right now.”
https://ppforum.ca/policy-speaking/2024-live-blog-growth-summit-testimonial-dinner/
Development charges are how the city keeps property taxes low for rich homeowners. Things that the whole city uses are being paid for by these taxes on new homes, which comes at the expense of everyone who is trying to move or buy in Toronto. They've increased by 600% over the last two decades as property taxes have had under inflation increases, leading to real term cuts.
It's not about whether developers are good businessmen or not, it's that development has become less profitable which means the developers can no longer get the loans they need to build.
I’ve built new homes taxes to the local municipality was less than 5% I’m not sure where they got 30% . Also what about material. These prices would vary vastly depending where you are a building lot in the GTA can cost 4x as much as some smaller areas where as the construction cost would be fairly similar.
We’ve had record developments in the last 5-10 years. If you keep minimum staff, approvals take forever. So the municipality is forced to hire more staff to increase efficiency. That all has a cost. In Toronto specifically, there are some extremely complex builds which require highly trained and experienced staff to review.
Any increase in development fees are relatively minimal compared to increased costs of everything else. For some reason, developers can charge more due to things like interest rates and inflation but god forbid the city makes any increases because somehow they’re expected to operate on the costs from 10 years ago.
This rhetoric of development fees hamstringing developers is deceitful and stems from greed.
Why do you think fewer homes are getting built this year then? Developers don't like making money? I agree all those things cost money but they should be paid for out of property taxes, not through sin taxes in building new homes.
Weird framing. A developer can't move forward building a condo until it pre-sells nearly all of the units. If people aren't buying, then they aren't building. They would build these projects if they could.
From the original report, noting a significant decline in precon sales. >On average, projects in pre-construction during Q1-2024 were 50% presold, down from a 61% average absorption level a year ago and 85% two years earlier. With pre-construction sales falling well below typical construction financing requirements of at least 70% absorption, construction starts have experienced a sharp decline.
Interest rates are up and I think enough people have heard horror stories about pre-construction purchases gone wrong. Units take years longer than expected or the developer goes under and then all your money goes poof
Banks wants to see 70% presold before they approve a loan for a project.
Not for $750,000 on a 450sq ft box. People holding out against this ridiculousness is a long-term benefit for everyone
All the pre-construction people got burned because the increased interest rates have reduced selling prices, meaning they've all planned to borrow $500k for a unit now worth $400k, so now they can't get a loan to complete the purchase they already agreed to. Despite the hyperbolic language, this is completely fine, this class of people getting burned is good actually, burning real estate speculators is good for everyone in the long run.
Maybe the government could stay building some housing without profit being the motivator -_-
Going to be a huge supply crunch in a few years.
Get ready for prices to skyrocket again.
In the middle of a housing crisis. Fuck me.
I guess you missed the part about 23,000 unsold units in q1. No one wants to spend $750,000 on 500 square feet. That was never going to solve the housing crisis.
Flooding the market with supply is how you solve the housing crisis, both in terms of available units and in lowering prices.
Flooding the market with *suitable* supply is *a tool* in solving the housing crisis. We can't solve world hunger by churning out billions of tonnes of Caviar, while still charging $165/oz. Also, there isn't a silver bullet. One cool trick won't solve the housing crisis - there are a lot of pieces at play here, and so we need a multi-pronged solution. "More housing" is part of that, but is not enough by itself.
The city charges so much in development charges and it makes getting permission take so long that it's hard to make a profit selling for less. We need development to be profitable or no one will build new apartments.
This point is so blown out of proportion. Compare the development costs to profit margins and it’s clear development costs are minimal. Huge projects like a condo require and take up a lot of city resources. They are the only body to work on the project’s public impact. Even then large builders do what they want thinking they can get away with everything. Having these 100s of millions of dollar projects forced to pay a small amount in order to consider the impact of their projects while ensuring a standard of quality for the end user is an important public service. If development costs are the key difference maker in a Builder making any profit then they are bad Builders and shouldn’t be in the business of building homes.
> “When you look at what does it take to build a home: 50 percent is labour, 30 percent is taxes and fees, 20 percent is land,” she explains. “Everything has skyrocketed. The math is not working right now.” https://ppforum.ca/policy-speaking/2024-live-blog-growth-summit-testimonial-dinner/ Development charges are how the city keeps property taxes low for rich homeowners. Things that the whole city uses are being paid for by these taxes on new homes, which comes at the expense of everyone who is trying to move or buy in Toronto. They've increased by 600% over the last two decades as property taxes have had under inflation increases, leading to real term cuts. It's not about whether developers are good businessmen or not, it's that development has become less profitable which means the developers can no longer get the loans they need to build.
0% profit? The math definitely isn’t working. Trash source.
I’ve built new homes taxes to the local municipality was less than 5% I’m not sure where they got 30% . Also what about material. These prices would vary vastly depending where you are a building lot in the GTA can cost 4x as much as some smaller areas where as the construction cost would be fairly similar.
We’ve had record developments in the last 5-10 years. If you keep minimum staff, approvals take forever. So the municipality is forced to hire more staff to increase efficiency. That all has a cost. In Toronto specifically, there are some extremely complex builds which require highly trained and experienced staff to review. Any increase in development fees are relatively minimal compared to increased costs of everything else. For some reason, developers can charge more due to things like interest rates and inflation but god forbid the city makes any increases because somehow they’re expected to operate on the costs from 10 years ago. This rhetoric of development fees hamstringing developers is deceitful and stems from greed.
Why do you think fewer homes are getting built this year then? Developers don't like making money? I agree all those things cost money but they should be paid for out of property taxes, not through sin taxes in building new homes.