Thursday, 28 May 2015

Toronto or New York - Who is the condo king this year?

Some people like to compare Toronto and New York. Some people get testy when you try to compare them. Like apple and oranges or more like scrappy kitty and a cougar. New York is an international city with well preserved historical architecture reflective of it's powerful history as the centre of an empire. Toronto is an international city too, but with a short time in the international spotlight with less of an empire feel.

Still, there's no denying that Toronto and New York have one thing in common. They are both centres of condo development and architecture in North America. So, let's do a little New York/Toronto comparison in a realm where they both share a great deal.

For many years, Toronto has been the #1 when it comes to our city's reign over urban construction. It has had the most residential condo units built in North America for several years. More than any other city, larger or smaller. Some see this as a prideful thing for our city - a quickly changing, impressive skyline, a sign that we have a growing city, a growing economy and a great indication that people want to live here. On the flip side, some see it as a sign that we are overbuilt and our condos are in oversupply. So, for those on the flip side, I say "relax". We are no longer #1 here in 2015. New York has edged us out this year by 701 units. Toronto has 38,114 multi-family units under construction. New York has 38,815.

Now this may not be very impressive when you consider the size of both cities. Afterall, New York is much larger than Toronto. Per capita, Toronto would lead New York by three times as many condo units under construction.

Still, the underlying factors for the change in the #1 spot has to do with city planning and the economy of the U.S. Toronto's reign as the condo king for years had more to do with the real estate crash in the U.S. following 2008. New York, LA, Chicago, Miami - everywhere in the U.S. there was a slowdown, if not a sudden halt in condo construction, for the last 8 years. It really wasn't very hard to take the condo construction crown. Now that cities like New York are in full recovery mode, they are building again.

It was not all about the U.S. though. Toronto has made some very big changes to allow for more condos to be built. The most impactful policy change had to do with the greenbelt policy now in place for over 10 years. Basically, a policy was put in place where you cannot build into the greenbelt around the GTA. The result: Developers were forced to focus on brownfields and parking lots inside the greater Toronto area. And Toronto has a lot of those, unlike New York, that has very little space for new development. It was more profitable to build up than low density housing. So, developers focused more on bigger condos, particularly in the downtown core where developers were allowed to build bigger than outside the core.

The funny thing when you compare Toronto and New York, has to do with the unit sizes. You would expect that Toronto would have larger units than New York since prices are higher in New York and space is more of a premium in the Big Apple. But you would be wrong. Almost 40% of new condo units under construction in NYC have three bedrooms or more. In Toronto, it is only 6% of condo units that have three bedrooms. I think this has to do with two things:
  1. New Yorkers are used to raising families in high density buildings for over a hundred years. In Toronto, condos are seen largely as a place for the single, the young family or the retired. They have only really been a dominant property option in the last 20 years.
  2. Houses in Toronto are more affordable than New York. So, more families can afford to live in them. Sure, it may be cheaper in Hamilton or Oshawa, but compared to an urban centre like New York, Toronto is still affordable to more of its inhabitants to buy a house.

All in all, it may be a good idea for Toronto to take a break from the top spot of condo unit producer. It's an interesting title to have but maybe one that you don't want to hold on to for too long. And so, we pass the crown to you, New York. Wear it with pride while you have it.

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