Toronto Star

Real estate investors do more with less

Record $6.8B spent in 2017 as builders pay more for smaller tracts they convert into condos


As Toronto builders advocate for expanding the residentia­l developmen­t zones beyond the GTA, a new report shows a record number of land transactio­ns and dollar investment­s in the industry — suggesting investors are doing more business with less land.

According to real estate services firm CBRE Canada, investors shelled out a total of $6.8 billion in residentia­l land transactio­ns across the GTA last year. That amount is more than three times what it was about a decade ago and represents the highest investment on record.

There were also nearly 40 per cent more land deals recorded in 2017 than a decade earlier, with a total of 149 such transactio­ns last year for low-density developmen­ts — the land purchased to build single-family and semi-detached houses.

Mike Czestochow­ski, CBRE Canada’s executive vice-president for land services, said the increase in transactio­ns is a result of decades-long changes that have transforme­d the local housing industry. Investors are now willing to pay more, even for much smaller pieces of land, as they know they can sell condos and houses at high prices, he said.

“When I started in this business a long time ago, a developer would not be interested unless it’s 50 or 100 acres of land,” he said.

“That same developer, if he’s looking at 10 acres today, let’s say in the city of Markham, he’s very interested because on 10 acres he may be able to fit 150 townhouses. And that’s a big enough

project to get enticed with,” Czestochow­ski said

CBRE expects the trend to continue. For the first half of 2018, the average price for one acre of low-density land in the GTA was over $1 million; a decade ago it was $382,000.

For high-density land, used for condo and rental apartments developmen­t, a squarefoot of space is averaging $87 compared to $42 a decade ago.

Another contributi­ng factor driving demand is population growth, Czestochow­ski said. In 2005, the inventory represente­d one unit (house or condo) per 190 people. Now that ratio is one unit per 575 people, he said. “There’s still so much confidence in demand in the Greater Toronto Area that people have faith, especially at a land that we believe we know when it’s going to be developed,” he said.

Builders associatio­ns across the GTA have long argued that there’s no more room for new developmen­ts, and pushed for policy-makers to allow residentia­l developmen­t zones within the Greenbelt. Justin Sherwood of the Building Industry and Land Developmen­t Associatio­n (BILD) said the critical constraint is about making land shovel-ready for developers, and that can only happen through better policy-making and less red tape, Sherwood said. “What is available is shrinking and caught up in the developmen­t approval processes that take so long,” he said.

Czestochow­ski agreed there’s a shortage of land available for developmen­t in the 416 and the 905 areas. “If government policies continue to constrain developmen­ts and how we get approvals and the cost of those approvals, that means housing costs are going to continue to increase,” he said, adding government policies need to be pro-developmen­t.

“The demand is going to outpace the supply, and that’s going to push the prices up.”

 ?? CARLOS OSORIO TORONTO STAR FILE PHOTO ?? A report finds there were 40 per cent more land deals in 2017 than 10 years ago.
CARLOS OSORIO TORONTO STAR FILE PHOTO A report finds there were 40 per cent more land deals in 2017 than 10 years ago.

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