Intensification Will Cause Dramatic Increase in Condo Prices: Carras

An increase in land and development costs could cause new condo prices to spike as much as $60 per square foot next year according to George Carras, the president of RealStrategies Inc. and founder of RealNet Canada.

In a recent article in the Toronto Star, Carras highlighted that the changes in the intensification building policies (including recently increasing the size of the Green Belt) are shaping the future of the region.  These changes are forcing the prices of land to increase and as a result, developers will be forced to increase prices moving forward to keep their profit margins in line.

The Green Belt and the Places to Grow legislation are two of the major reasons we have seen the condo boom grow to the levels that we see today.  We discuss both of these in detail in our Ultimate Guide to Investing in Toronto.

Carras believes that in our tight market conditions, where remaining unsold condo inventory is at a five-year low (8,697 units) that the cost of new condos will be highly influential on establishing market price.

The cost of developing a new condominium for developers is expected to increase by $30 to $50 per square foot (through a combination of increased land costs, government fees and other costs) and as a result we could see a spike in prices as much as $60 per square foot.

In the past, developers have dealt with increase in costs by offering smaller and more efficient floor plans.  However, many believe that developers have already pushed the size boundaries as far as they will go so now developers will need to look at other ways to continue to absorb the increase in costs.

While the narrative of the Toronto market is that pricing is getting out of control, we believe that this is just the beginning and we are not even scratching the surface of what to expect moving forward.  Our population continues to grow (mainly though immigration) and demand for housing is far outpacing supply.  Throw increased intensification efforts in the mix, and you quickly see that our market is primed to explode.