The central bank warned this month that Toronto’s condo market, coupled with sky-high consumer debt levels, is the biggest domestic threat to Canada’s economy and financial health.
Ottawa’s top policy-makers, including Finance Minister Jim Flaherty, have been sounding alarm bells since at least early last year over fears that developers are building too many condos, creating the possibility of a crash in the market.
So, it goes without saying that if Mr. Flaherty and the central bank had their way, Toronto’s condo developers would have begun putting on the brakes some time ago. While there has been signs of a slowdown in condo development, the latest data indicate that new cranes will continue to dot the skyline.
Peter Freed, a developer whose firm, Freed Developments, is credited with revitalizing the King Street West neighbourhood, is one of those who is still pouring money into new projects. His buildings include the swanky Thompson Hotel, the new Thompson Residences and Fashion House.
The Globe recently sat down with Mr. Freed in the Thompson Diner to talk about why he plans to keep putting up new towers.
What are you seeing in the market right now?
Over the last quarter, we’ve been very, very busy. Sales for everyone cooled off mid-2012, and started off slow this year, but about a month ago I realized that we were on pace for the best quarter revenue-wise in our corporate history; we’re on target to exceed $100-million in sales, which I’ve never done before.
So sales are bouncing back?
We have to work for the sales – it’s competitive – but we’re still getting good prices. I still think if you look at the prices for condominiums in Toronto, you can buy beautiful units in great neighbourhoods for $550 to $700 a square foot. In how many cities in the world like Toronto can you do that? With cheap money, those types of prices, and strong employment in Toronto, what do people want before they can say, ‘Hey, things are pretty good’?
So is the market rebounding?
The years in the recent past were exceptional and shouldn’t be considered normal. I think [developers’] expectations get warped. You get this sense of entitlement that, when you launch a project, you should sell 70 per cent of it in the first 90 days. If you can do that sometimes, celebrate, be grateful, but don’t expect it.
Who is buying right now?
I think the condo market, primarily, is the new rental supply in the city. The vacancy rate is below 1 per cent, the supply is getting absorbed. There are users buying in specific projects as well, but they’re certainly being overshadowed by the investor and the rental market supply.
What are you seeing in terms of prices?
Pricing is flat. Last year it stepped back a little bit, 10 per cent or a little bit more or less depending on the project, but I think it will stay flat for a little while and I think in a year or so we’ll start to see it increase a bit.
Are you putting your money where your mouth is in terms of future development?
Certainly. We’re working on acquiring land in a few great neighbourhoods right now. But we pick our spots carefully. We’re making a big bet on Yonge and Eglinton – we have 1,700 units in our pipeline there – and we have another two or three objectives that we’re working on. King West, we’re almost finished.
The fears around Toronto’s market aren’t convincing you to expand to other cities?
We have one project in Muskoka, but no. When I’m older, I’m certainly open to expanding. I like to drive to work and then go home at the end of the day, and I don’t like flying around too much for work.