The CEO of a U.S. luxury home builder says his company considered expanding into Toronto’s condo market but was scared off by the high number of investors buying real estate in the city.
Toll Brothers Inc., which designs, builds and finances homes in 19 states, “snooped around” in the city about three years ago, but was concerned that 60 to 70 per cent of condo buyers didn’t plan to live in their homes, said CEO Douglas Yearley.
“We’re always looking for new places to grow, but the level of investment, and not just foreign investment, is what concerned us,” Mr. Yearley said following an appearance at the Society of American Business Editors and Writers conference in New York on Friday.
“We saw a lot of people buying with no intention of living there – they just planned to flip,” Mr. Yearley said. “When you have a lot of flippers, that’s when a bubble comes.”
While he said he hasn’t looked closely at Toronto’s market recently, Mr. Yearley said looking back now, “we missed an opportunity.”
The average selling price of an existing home in Canada’s biggest city has risen by more than $100,000 in the past three years, from $465,369 in September 2011 to $573,676 last month.
Economists have cautioned, however, that condo prices may have reached their peak.
Toll Brothers recently expanded into Seattle and Mr. Yearley said the company will now start studying the Vancouver market. “We haven’t been up there a lot, but we do plan to look at both Toronto and Vancouver.”
Mr. Yearley added that a key difference between the Canadian and U.S. housing markets was that Canada doesn’t offer mortgage interest rate tax deductions to encourage home ownership. That has been a staple of the U.S. system for decades, but has not taken hold in Canada.
Speaking about the U.S. market in general, Mr. Yearley said that while the lasting impacts of the financial crisis have made home ownership less attainable for many Americans, it is still very much “part of the American Dream.” Americans are viewing their homes more as shelter than as investments but still take great pride in ownership, he said.
The U.S. housing market has shown signs of a turnaround this year, with prices, construction and sales rising. However, the pace has cooled in recent weeks.Report Typo/Error