Changes Coming to the Condo Markets in Canada

Benjamin Tal explains why the next generation of condos won’t look like the last one.

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When you say no building, I mean, in some areas it’s literally no building.

Absolutely. You know, developers are not going to lose money, and if it doesn’t make sense, uh, they are not going to build. So what’s happening in the condo market? And that’s very important because it’s going to change. First of all, all the Mickey Mouse developers are out.

Yes.

All those secondary developers that, uh, didn’t know what to do with themselves and started building, they are out there because they don’t have the capital to sustain it.

So that’s actually a good thing. So the market is now full of developers that are healthy, well-capitalized. That’s one thing. The other is that investors will be only twenty percent of the market, not sixty, seventy percent of the market, which means that the focus will be on end users.

Yeah, and we’ll build the right size for once

Exactly. End users are families. They need size. Therefore, we will be building not closets, but houses or apartments. That’s very good. But also, and that’s very important, also, if you are a family with two kids, you cannot wait five years for a pre-sale.

No, absolutely not.

Which means that we are going to build more on spec. Namely, you build and you sell, which means that the developers will have to put more equity, which is fine, and banks will have to take more market risk, and they are ready to do so. So it’s going to be a very different market.

No, I agree with all of that, and I think we do need to build obviously bigger condos. It was ridiculous the size of the Toronto condos. And you, you used the 60 to 70%, uh, rate for investors. I think in Toronto it was 90 to 95%

Absolutely. It was crazy. It was too much, and many of those developers, uh, were building on those, uh, you know, investors, and those investors are not in the market anymore, and therefore the market is going to change dramatically. You cannot go through this kind of shock without changing, and we are going to change.