Peter Gilgan, the billionaire owner of North America's largest homebuilder, on why you shouldn't count on housing prices to come down any time soon
but when you grow up like that, it's normal. We're all still alive and well. We've always got each other's backs.
I started as a chartered accountant. I learned a lot, because most of my clients were small and medium-sized businesses, and the principals would share their thoughts and aspirations and business plans with me—as well as imploring me to make sure they paid the least amount of taxes possible.
It's in my nature to think in three dimensions. I've got VR in the noggin. If we're travelling, everyone always says, "Peter's going to pack the van, because somehow he's going to make all those suitcases fit." My hands just put things in the right place. That's really helpful when you're designing and building houses—it's not just lines on a piece of paper.
My career in construction started really simply, with two lots and a bank loan in Burlington, Ontario, and a desire to make homes that people really wanted to live in. When they pulled up in the driveway, it would put a smile on their face.
My wide-lot design changed the face of the suburbs. I was standing in front of one of our developments, and I had a panoramic view down the street. I looked at this sea of brightly coloured 16-foot garage doors and I got a funny feeling in my stomach and thought, "This is the best you can do?" Why not build wider houses, with up to 60% more windows, and the garages set back a bit—putting the house back on the street?
The housing part was relatively easy compared to the land development part—changing street widths, road allowances, how utilities were placed, sidewalks, parking plans. Because the whole objective was to be able to deliver a nicer home for the same price.
We live in two rooms: the kitchen and the family room. So the more connected they are, the better. I'm always reminding our designers and architects to walk me through a house. Where do we sit, where do we eat, where do we watch a movie together?
Today, the word "open" is de rigueur. Less wall is better. If you're in the art business, you're not very happy because there are no walls to put art on.
One half of my brain is always on the glass-half-full, we're-just-getting-started side. The other half is eternally paranoid, always looking for what can go wrong. Both of those motors have to be running all the time, though sometimes one is more in the background. That's a summation of how to get through business cycles.
What happened in the U.S. with the housing crisis is that the supply side got way ahead of true demand. Here, the natural demand for ground-related housing is in the range of 25,000 to 30,000 units per year. But there's no available land, so there's constant pressure on the demand side that is going to support pretty high prices forever.
There has been more of a shift to living downtown. But most people buy high-rise condos because that's all they can afford. That's not just my opinion—we've done massive amount of research on this. We don't care, because we build everything.
I have real empathy for young families, with two people working at good jobs—and working their faces off—and they can't afford a house. It all starts with land supply. Here in Ontario, there is such a constraint on the supply side, brought to you by government regulation, that the development industry can't get ahead of themselves.
My advice for homebuyers: Don't expect prices to fall too much more. Are you buying a home to live in for a long time? If yes, don't worry so much about the price. Because as high as prices seem, they've seemed that way since I was a teenager.
The housing bubble has burst already. It burst in April. I predict that prices will come down a little and then stabilize—that last six months of froth will come off.