It’s Time To Build Apartments

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CIBC Says, “It’s Time To Build Apartments”.

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Distinguished economist Benjamin Tal says that rentals “must be part of the solution” to the GTA housing problem:

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Report Summary:

  • GTA is not a normally functioning market due to a history of legislation failure, as well as a severe lack of land ;
  • House prices, while always on the rise in the GTA, have followed a “predictable path” until 2016, when the average-home price increase spiked by 17.3% and is currently at over 20%;
  • Unexpectedly, condo prices followed suit to almost parity, rising by 16% in the fourth quarter of 2016;
  • Contrary to the perception that there are “too many condos”, condo sales increased by an record 34%, while the supply was down by 6%;
  • The demand for housing in the GTA is not only strong, but “stronger than perceived” due to “undercounting of the number of non-permanent residents”;
  • Government intervention to prevent the house prices to grow at this rate, such as foreign tax policy and new mortgage rules do not make a significant difference in an atypical market such as GTA.

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Benjamin Tal
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Deputy Chief Economist
CIBC World Markets Inc.[/TS_VCSC_Advanced_Textblock]
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Download the Full Report (PDF)

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Report conclusion:

  • An increase of supply of rental units is desperately needed in the GTA for a “real and lasting change”;
  • GTA’s rental market has “never been hotter” with average rent rising by a record of almost 12% in 2016 ad 52% of the leases were above the $2.75 per square foot;
  • The new wave of renters (young families) will need “stability of long-term renting”;
  • For builders in the 416 area, the gap between the profitability of condos and profitability of purpose-build is very narrow; on surplus land, it makes even more sense to favour purpose-built;
  • Incentives from the government on new rental projects will make the difference between an “affordable and an unaffordable GTA housing market”: expediting the approval process for purpose-built projects, allowing higher intensification rates and cutting the HST will ultimately encourage builders to complete purpose-built projects before a full-blown affordability crisis.

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New Apartment Construction is Already Working

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*Dip in 2017 is due to unit numbers yet to be announced.*[/TS_VCSC_Advanced_Textblock]
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Recently Built Apartment Buildings in the GTA

Approx. 24,000 Units

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