With a high number of investors buying into the Toronto housing market, one United States builder was scared off after looking around and studying the local real estate economics. When the thirteenth largest construction company in the U.S. pulls out of a market and declines an opportunity to build a multi-family development, the question as to why remains.
The CEO of Toll Brothers Inc., Douglas Yearley, recently revealed that the American company looked around at the Toronto housing market as a potential place to build and expand their portfolio. However, given that there were signs of a high number of investors with intentions of buying and then flipping a property, and never living in it, the company chose not to pursue the Toronto market. By their estimates, they found that sixty to seventy percent of condominium buyers are investing with this purpose in mind. That left them unsettled and uncertain in the Toronto market as a whole.
These were their findings three years ago and Toll Brothers admits that they may have missed a great opportunity. With the average condominium priced at $100,000 more now than it would have been three years ago, the company may reconsider Toronto as well as Vancouver, even though indicators show that prices for Toronto condominiums have been leveling off.
Signs are that condominium development could be leveling off as well. While many locals have seen the presence of numerous cranes hovering over the city in recent years, the cranes seem to be slowing down and coming down. With 40,000 condominium units breaking ground just two years ago, less than 20,000 are slated to break ground this year. While there is lag time between condominiums being slated for development and keys actually going into the hands of tenants, the overall trend seems to be slowing down for the time being. This slow down can be seen as a healthy adjustment for the real estate market, as many condo units end up going to the rental market and much like current condo builds, the overall number of renters is lessening.
One important difference between the Canadian and U.S. housing market, as noted by Yeardley’s recent revelation, is that Canada does not offer a home mortgage interest deduction on taxes. This is offered in the U.S. and helps not only encourage home ownership, but also makes it attainable for many Americans. Nevertheless, that does not seem to discourage investors from continuing to buy up properties and moving to Toronto and it’s suburbs.