Bubble or no bubble, David Mirvish decided he had to proceed with an extravagant condo development in Toronto now because if he didn’t, he and architect Frank Gehry might die before it got under way.
Mr. Mirvish officially unveiled plans on Monday for a massive new project in the heart of the city’s entertainment district that will include three condo towers, each stretching at least 80 storeys high. Earlier this year, fears of a condo bubble prompted Finance Minister Jim Flaherty to warn that developers might be building too many units in the country’s most populous city. Citing that as a particular concern, Mr. Flaherty tightened mortgage insurance rules in the summer to take some steam out of the housing market, and the latest data suggest condo sales are slowing significantly.
With sales slumping, condo projects, which tend to take years to come to fruition, are becoming increasingly risky gambles for developers. The month after Ottawa’s rule changes came into effect, sales of new high-rise units were the lowest they’ve ever been in the month of August in Toronto since RealNet Canada Inc. started tracking the data 13 years ago.
The team behind this latest project says that it will change the plans or stall the development if it doesn’t appear that the market has an appetite for all the units. “But if we wait for the market to do the planning, Frank and I will be dead,” Mr. Mirvish said in an interview.
“If it slows down, then we’ll have to slow down,” he said. “Frank Gehry is 83 right now and I’m 68 ... time is not our friend.”
The three towers will have more than 700 units apiece, meaning each will represent three to five per cent of the total new units coming up for sale in the city, he added.
“We’re going to be responsible,” said Peter Kofman, president of Projectcore Inc., a developer and project manager that is working on the development.
He said the plan is to build the first tower on the eastern side of the property, and then weigh the market’s reception to it before deciding when and how to proceed with the second and third towers.
“If the market’s not there, then we can wait,” Mr. Kofman said. “We’re not pressured.”
Mr. Gehry said he has felt shut out of big commissions in Toronto, his hometown, except for the Art Gallery of Ontario, and if Toronto waters the project down too much, he won’t do it. Critics are already saying that it’s too tall.
“I’m 83 years old,” Mr. Gehry said. “I’ve heard everything, I’ve been beaten up for everything. I’ve been called everything. So I’m kind of used to it.”
Construction on the first tower could begin in 18 months or two years, Mr. Kofman said. Prices and unit sizes are still in flux, and will depend on the market.
While some units will sprawl over 3,500 square feet, “our goal is to build smaller units [in the neighbourhood of 420 to 900 square feet], because we think people who are younger will come there, but to make them in a clever enough way that they can join a couple of them if they have families,” Mr. Mirvish said. The average size of new condo units in Toronto has been shrinking as developers have sought to make them more affordable, as well as more appealing to investors who want to buy them and rent them out.
Because residents would have special privileges to see exhibitions in the on-site gallery, and because the space will be unique, Mr. Mirvish said, the units will be slightly more expensive than others nearby. “But because the units aren’t so big, it won’t preclude people,” he said.
Mr. Flaherty told The Globe and Mail in the spring that he was worried developers would keep building new units until sales dry up, which could cause a crash. “I do worry about the last person buying a condo in Toronto, and people getting caught,” he said.
He tightened mortgage insurance rules effective July 9, including cutting the maximum length of an insured mortgage to 25 years from 30. He believes the changes are working. “There had been the potential for a boom, but even the Toronto and Vancouver markets have calmed, including the condo markets,” he said recently. sept interview
RealNet’s index price for new high-rise units in the Greater Toronto Area fell 4.8 per cent in August from a year ago, to $436,460, as sales of new units fell to 645 from 1,967. In just the downtown area, sales fell to 469 this August from 1,027 last August.
Resales of existing condos in the downtown area covered by the 416 area code dropped 22 per cent in August from a year ago, causing the average price to sink four per cent to $349,489, according to the Toronto Real Estate Board.
Mr. Mirvish said his ambition for the project has more to do with art and architecture than condo sales. “It wasn’t really that I went out because I’m developing something and I bought land and I’m building condos,” he said. “What I’m doing is I am continuing my art collection. I am collecting three sculptures that you can live in by a great artist. And I’m sharing with the public something that took me 50 years to put together.”
Asked whether he would live in the project, he said: “I’m very tempted.”
With a report from Marcus Gee