Business

Why the condo market is hot

The boom brings back memories of the 1980s

TOM FENNELL November 3 1997
Business

Why the condo market is hot

The boom brings back memories of the 1980s

TOM FENNELL November 3 1997

Why the condo market is hot

The boom brings back memories of the 1980s

TOM FENNELL

With her car stuck in traffic on Vancouver’s Burrard Street Bridge one evening last year, Angie Nonis had time to contemplate the tony condominiums lining the city’s inner harbor far below. She loved her spacious three-bedroom brick home in suburban Port Moody, but the 45-minute commute into the city had become an unbearable grind. So, last year, she sold her house and paid $365,000 for one of the waterfront condos—a 150-squaremetre, two-bedroom unit with a spectacular view of the city’s skyline. “I just didn’t have the time to do the maintenance on my home,” says Nonis, a 34-year-old mortgage broker with VanCity Credit Union. “And I was spending way too much time in my car.”

Nonis is part of a growing trend. Young couples, retirees and workaday commuters who want to be closer to their jobs are forsaking the suburbs and heading downtown, fuelling a nationwide boom in condo sales. In the country’s hottest markets, condos now account for roughly 40 per cent of new home sales, compared with a traditional average of less than 30 per cent.

Canada’s condominium industry has not been this busy since the prosperous 1980s, when hundreds of glass-and-steel towers sprang from the ground, boasting luxury appointments such as marble foyers and goldplated bathroom faucets. When the real estate market crashed in the early 1990s, prices collapsed and dozens of projects were cancelled. But now, many of those massive developments have been revived and dozens of new projects are on the planning boards. As in the 1980s, rich Chinese investors from Hong Kong and Taiwan are snapping up two or three at a time—but they are outnumbered by thousands of ordinary Canadians, including young families. ‘Ten years ago, if you said you were moving into a condo, you had either been divorced or wiped out in the stock market,” says Bob Rennie, a partner in Ulinder Rennie Project Marketing, one of Vancouver’s leading condominium promoters. “Now, it’s socially acceptable to downgrade into a condo.”

The trend is most pronounced in Vancouver, Calgary and Toronto, where developers are catering to nearly every market niche. The fastest-selling units are priced at $200,000 or less, catching the eye of firsttime buyers who have discovered that, with low interest rates, they can carry a mortgage for less than the cost of renting a similarly sized apartment. Many of the buyers are so-called empty nesters—couples whose children have left home—and senior citizens who have sold their homes but want to stay near their families and urban amenities like theatres and downtown boutiques. “The population is aging,” said Garth Mann, president of Calgary-based Statesman Homes Corporation, a leading condo developer. “Mature buyers are looking to get out of their large homes where they raised their families and are scaling down.”

While moderately priced condos abound, there are still examples of 1980s-style lavishness. In Vancouver, at the Venus on West Georgia Street, a 450-square-metre penthouse with a 180-square-metre roof deck recently sold for more than $2 million. At the Bayshore project overlooking Vancouver’s Stanley Park, a 540-square-metre penthouse with terrace is going for $5 million. In Toronto, 5 King West will be one of the most unusual and expensive condo projects ever developed in Canada. Launched by veteran developer Harry Stinson, the tower, known as The Sliver, will be 46 stories high and only nine metres wide—making it, in Stinson’s estimation, one of the thinnest highrise buildings in the world. Private, voice-activated elevators will carry tenants to their apartments. The largest standard unit, the 450-square-metre, twostorey townhouse, will be priced at $2 million, and Stinson believes there will be no shortage of buyers. “This is the Donald Trump style of real estate,” he says. “The ideal buyer is someone with a little flair who doesn’t mind showing it.”

The boom may bring back heady memories of the late 1980s for some developers, but buying habits have changed dramatically. Stinson says wealthy investors are still a factor, often buying two or three condos in a development and accounting for 40 per cent of sales in the Vancouver and Toronto markets. But unlike the 1980s, rich offshore buyers are no longer willing to snap up units sight unseen. Today, he says, they are hunting for prime sites overlooking Lake Ontario or Stanley Park. Rennie says investors look for tasteful developments that fit the neighborhoods in which they are located. “Offshore investors will only buy what the locals are buying,” says Rennie. “They want to know that they have liquidity.”

Bidding wars, a dramatic part of the 1980s condo scene, are also a thing of the past. Barry Lyon, president of N. Barry Lyon Consulting Ltd., a Toronto-based real estate research firm and co-publisher of Urbanation, a trade publication, says buyers today are “calculator shoppers” who look at dozens of projects and take weeks to make up their minds. They are searching for homes, he says, not investment vehicles to flip for a quick profit.

Rennie believes that a new type of buyer is beginning to enter the market. Families with small children are rethinking suburban life and choosing to live in downtown condos closer to work, with green areas such as Stanley Park as their backyards. ‘Time,” he says, “is our most valuable commodity, so we are willing to live in convenient spaces.” Nonis says she is finding it just as easy to raise her nine-year-old daughter, Sarah, in downtown Vancouver as in Port Moody. “Now that we’re in town, we do even more stuff together,” she says. “We go to the beach and hockey games. There is even more to do.”

The change is perhaps most dramatic in Calgary, where several major condo developments were shelved following the collapse of oil prices in 1983. Richard White, executive director of the Calgary Downtown Association, says about 1,000 units will be built in the core this year, and the number of people living in the city centre is expected to jump by five per cent. New attractions are sprouting up to serve the growing downtown population. One of the most striking is

the Eau Claire Market. Located between the city’s office towers and parks along the banks of the Bow River, it is similar to Vancouver’s popular Granville Market, and boasts dozens of food stalls and craft outlets. “Condos were one of the catalysts behind the market,” says White. “People love to be where the action is.”

Even though buyers are more cautious, analysts say many are still being lured into poorly designed developments—and could pay the price. Brad Lamb, president of Brad J. Lamb Realty Inc., a condominium specialist in Toronto, says some developers are trying to cash in on the boom by rushing projects to market that should never have been built. He says many of the potential trouble spots are condo conversions, in which office towers are stripped down to their concrete superstructures and then refitted. Because they were originally designed as offices, they often have poor sight lines and odd-shaped rooms. When the owners try to sell them, Lamb says, they may find that property values have not kept pace with the overall market.

Despite the growth, Stinson believes that the condo industry could do even better if developers fully understood what consumers want. He says the industry mistakenly believes it has to keep building the same styles of projects to be successful. In 1994, he broke ranks and built the Candy Factory, the first loft-style condo project in Toronto. Located on a formerly rundown stretch of Queen Street West, it quickly sold out, and similar developments are now selling rapidly in Calgary and Vancouver. But he says other niches, such as large apartments designed for families, remain largely unexploited. “The development industry has a real reticence to try anything different,” says Stinson.

Regardless of architectural style, developers are betting that the condo boom has legs. “As long as interest rates stay stable and people keep on aging, the market will grow,” says Lyon. So, too, will the profits being reaped by savvy developers. □