It’s no mystery that Toronto’s housing market is hot.
And unless you’ve been looking the other way, or not looking at all, you’ve probably also seen a lot of condo buildings pop up anywhere one can be built.
Add to that, anytime you have a conversation with someone living in Toronto, or the GTA, its about the hot housing market and the inevitable statement which burns my ears, “the bubble will pop soon” or question “when will the bubble pop.”
But, after many consecutive years of rising home prices, it begs the question:
“What is driving the market so high?”
So, I decided to some research for myself and truly understand why our market is flying so high, and how long will it continue?
The answer to the latter question is much harder to answer, simply because even IF we consider all the variables, no one can really predict when the market will plateau. What is true, is that a correction is inevitable. Figuring out when, is a defeating goal.
To answer the former question, there are a lot of indicators helping us understand. But, as a political and policy junkie, I like to start there first, and it is what I would like to focus this article on.
Policy. Policy, Policy. Its where economies are made, and where they die. And, in the case of Ontario, and Toronto more specifically, we’re talking about INTENSIFICATION a policy developed by the province to encourage higher density builds.
What is Intensification?
In an effort to curb urban expansionism, and protect the environment, the Government of Ontario has adopted this policy.
Intensification means the development of a property, site or area at a higher density than currently exists, through development, redevelopment, infill and expansion or conversion of existing buildings.
Here are a few points (from the Ministry of Municipal Affairs and Housing) which Intensification is designed to aid with:
- reducing carbon footprints
improving access to public transit
using resources such as lands, buildings and infrastructure more effectively
protecting the natural environment and biodiversity by
limiting urban expansion
enhancing community identity
incorporating green features that offset and support new development
creating active streets that promote healthier patterns of human activity
creating economic opportunities
- improving municipal fiscal performance
Beyond this, if we look at the Places to Grow Act (2016), which works in concert with Greenbelt Plan (2005), the Oak Ridges Moraine Conservation Plan (2002), and the Niagara Escarpment Plan (2005), this Plan provides policies that promote intensification and revitalization and directs growth to built-up areas through a comprehensive 25-year vision designed to:
revitalize downtowns to become vibrant and convenient centres
create complete communities that offer options for living, working, shopping and playing
provide greater housing choices to meet people’s needs at all stages of life
curb sprawl and protect farmland and green spaces
reduce traffic gridlock by improving access to a greater range of transportation options
So thats a lot of jargon. But what does it all mean?!
Well simply put, in order to protect green areas and reduce sprawl, the Ontario government has developed a mandate which encourages higher density builds and gentrification of underdeveloped or undeveloped areas.
So if it’s the policy of the province to encourage these developments, it partly helps us understand what’s driving prices so high.
If intensification means that increased density is more valuable , then the land on which a single dwelling sits becomes even more valuable. Lets do the math:
Let’s say ABC Development Corp wants to build a new condo development in a recently rezoned area where traditionally single family detached homes existed. If, a home sells for $1 million, and they need 5 plots of land to develop a 15 storey building with approximately 20 apartments on each selling for at least $350,000 ($350,000 x 20 apartments x 15 floors), suddenly paying $1 million dollars for a home seems, well frivolous.
In the end, the point Im trying to drive home is that policy matters. And in most cases, in order to understand the market, or where money is attracted to we have to consider how our very own government is encouraging growth.
Let me know what you’d like me to write about next! Comment in the section below. Thanks for reading.