2 Reasons Why Condo Prices Are About To Skyrocket 🚀
Walking or driving around the city you can see lots of cranes. It seems like there are a LOT of condos being built. Should you be concerned with a lot of supply? Don’t because I’m about to give you 2 reasons why condo prices will skyrocket.
City of Toronto increasing development fees are going up by 50% (click on photo for link)
Real estate prices are driven by supply and demand. Let’s look at the demand side of the equation first:
The federal government has a target of 400,000 newcomers per year for the next few years. We have labour shortage and more people are needed as retirees exit the workforce. About a third of the newcomers end up in Ontario with the majority in the Greater Toronto Area.
Economy reopening: More employees are going back to the office and the 3 major universities in the city (UofT, York & Toronto Metropolitan) will resume in-person classes
The above 2 factors are driving demand for housing whether it’s ownership or rentals especially for students living downtown.
On the supply side, things are getting more challenging:
Cost of labour, construction materials, financing and government fees are pushing developers to pause or cancel projects
The city of Toronto has approved a 50% increase, yes 50%, in development charges. For a new construction one bedroom condo, the development charges will be $52,000!! This is not to mention other fees & taxes charged by the city such as section 37 that will be passed on to buyers. The 50% increase in development charges will be phased in: half of the increase in 2023 and another half in 2024. Development charges will range from $35,000 to $137,000 for detached houses.
The above 2 factors will result in one or both of the following:
Delayed and cancelled projects which we are already seeing
Significant price increases for new construction condos
You think the city would encourage more supply to accommodate a growing population and to provide supply of affordable housing but shrug!!
For these 2 reasons, supply of new condos will be further restricted creating a bigger supply/demand imbalance. This will result in strong appreciation for resale condos and rental prices. This is good news for real estate investors but quite frankly frustrating since politicians talk about creating a livable affordable city however their actions do not support that.
Till next time….happy investing!!