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15 Reasons Why Toronto Condo Prices Have Doubled and Why They Will Double Again

223 15 Reasons Why Toronto Condo Prices Have Doubled and Why They Will Double Again

Why have condo prices gone up so fast in the last decade? As Ben Myers put it, the reasons are many and complicated. There’s not just 1 factor driving this market. In this episode Andrew la Fleur breaks down 15 reasons why condo prices have doubled in recent years and why they will most certainly double again.

Click Here for Episode Transcript

Andrew la Fleur: On today’s episode, we’re going to talk about 15 reasons why condo prices have doubled, and why they’re set to double again. Stay tuned.

Recording: Welcome to the True Condos podcast with Andrew la Fleur. The place to get the truth on the Toronto condo market, and condo investing in Toronto.

Andrew la Fleur: Hey, and welcome back to the show. Once again your host here, Andrew la Fleur from Thanks, for listening in. On today’s episode, I’m going to talk to you about 15 reasons why Toronto condo prices have doubled, and why they will double again.

Andrew la Fleur: So, this podcast was inspired by a recent Twitter rant by a regular guest of the show, real estate analyst Ben Meyers. Ben Meyers of Bullpen Consulting hit a great little series of tweets on Twitter recently, and as always, I’ll include a link to this in the show notes if you want to check out the original tweets by Ben.

Andrew la Fleur: He actually listed … He listed more than 15 things. I think he listed about 25 items that were factors that have driven up Toronto condo prices over the last 10 years. He started responding to just general comments I guess, out there by people saying, “How did we get here? How have condo prices risen? How is it that they’ve risen so much so quickly in the minds of some people?”

Andrew la Fleur: And he’s saying he wanted to explain. He wanted to basically say, there’s no simple explanation. It’s a whole bunch of factors combined. And so, I wanted to go over 15 of these, and sort of give my commentary on these items, and basically tell you why this is going to continue. There’s nothing that has changed, and if anything, the same reasons why we’ve gotten to the point where we are today over the last, say, decade, how prices have doubled or more than doubled in the last decade. Well, these are going to be still true, if not even more true over the next decade, and we can expect prices to double again.

Andrew la Fleur: Are they going to double again in five years, in seven years, in 10 years? We don’t know. Nobody knows, and nobody has the crystal ball to say exactly when prices will double again from here. But we know for sure that condo prices, and real estate prices will double again. It’s just a matter of time.

Andrew la Fleur: Real estate prices always double, and then they double again, and they doubled again. They just keep going up forever in the long term. And if you’re a long term investor, and if you’re thinking and buying strategically for the long term, you will see a day where your investment has doubled in price.

Andrew la Fleur: It may take in some cases, as little as a lot of condos that my clients have bought, and I have personally bought have basically doubled in price in about four years, three four years some of them. But the majority of the market, and majority of investments have doubled in Toronto over the last, say, six, or seven years or so.

Andrew la Fleur: And even if you pick the real crappy property, it’s probably at the most 10 years since your property has doubled if you picked a crappy one. If you picked a great one, you might have seen your price double in the last say three years. But most places have doubled in around the last five, six years.

Andrew la Fleur: So, let’s get into it. The 15 reasons why condo prices have doubled, and why they’re set to double again. And number one from Ben’s list here just picking, cherry picking some of these items here. Less low density lands caused by build out, which is actually his first point, less low density land.

Andrew la Fleur: So, what I believe he’s referring to there, basically is the fact that there’s just not readily available low density low rise lands available in around the GTA. So, it’s not like the 80s, and the 90s where there was just tons of land all over across the GTA north, east and west where builders could just go out, and buy farmland and just build row upon row, upon row of low rise housing.

Andrew la Fleur: Those days are gone. Those days are long gone and so, the big shift that has occurred, especially since 2005, the Ontario place is to grow, the big shift that occurred and has occurred since 2005 is, instead of building out, it’s building up. So, the days of building out are over, and the days of building up are well, underway. So we’ve seen a dramatic shift where, 10 years ago, 80% of the new homes being built in the GTA were low rise homes, and 20% were condominiums, say roughly.

Andrew la Fleur: Now, it’s the complete opposite where 80, 90% of the new homes being built in the GTA or condos, and something like 10, 20%. I don’t have the numbers in front of me, are low rise. So, a dramatic shift there.

Andrew la Fleur: Number two, high immigration. We come back to this point at time and time again, immigration, immigration, immigration. Population growth is the backbone of this real estate market that we’re in, and will continue to be so for years to come.

Andrew la Fleur: As I talked about in the last podcast if you had a chance to listen, immigration of course is set to increase significantly over the next few years. Not to go down, not stay the same, but it’s going up. So as that happens, we do expect real estate prices to also go up. Not enough homes, not enough apartments, not enough condos, not enough rentals, not enough resales, not a new home. We don’t have enough homes for everyone to get something. Supply and demand is out of whack, and primarily, because of immigration.

Andrew la Fleur: And I believe that more, and more, a higher, and higher percentage of overall immigration to this country is going to go to cities as opposed to suburban and rural areas. In small towns, higher and higher percentage will be going into the major cities. And I believe the higher, and higher proportion of those that go to cities are going to go to Toronto, and the GTA, specifically.

Andrew la Fleur: The rich will continue to get richer. That is a pattern that we’re seeing time, and time again in the global economy, and then the shift towards cities is a trend that’s not stopping anytime soon.

Andrew la Fleur: Number three, low interest rates. Low interest rates have obviously been a huge factor in driving real estate prices over the last decade. Money is cheap, and people are borrowing more and more of it the cheaper than it is. And it’s been extremely historically cheap for, at least the last 10 years. And there’s been a lot of, every year for the last 10 years, it’s interest rates are going up, interest rates are going up, interest rates are going up, and they never do.

Andrew la Fleur: Yes, they’ve gone up a little bit over the past year, year and a half or so, but they’re still at historic lows, nothing compared to the 70s 80s, even the 90s. And as I’ve talked about on the show, I believe personally, the way that I look at the data that’s in front of me, I believe that low interest rates are here for a very long time to come.

Andrew la Fleur: Number four, gentrification of all downtown areas. This is an interesting point. Gentrification of all downtown areas. So, it used to be, the big question you would ask as a real estate investor is, I want to get into the market, and I want to invest somewhere, where is the next up and coming area? That famous phrase, up and coming area.

Andrew la Fleur: Well, and it used to be 10 years ago, I would say, “Well, yeah, here’s there’s this pocket, there’s that pocket there’s …” For years, and years [inaudible 00:08:31], it seemed to be Leslie Ville was the up and coming neighborhood for like about a decade. It was just always up and coming, but in reality, where we stand today basically, there are no up and coming areas in Toronto. That basically everything has arrived.

Andrew la Fleur: Everything is already up and already came. It’s already there. We just can’t find these pockets like we used to where values are depressed, and there’s tremendous discounts compared to other areas. Just everything is expensive everywhere. So that is a factor where it drives prices up when the average price everywhere is higher, because there are no crappy areas anymore so to speak, where there used to be lots of crappy areas around you could find. Just very hard to find those sorts of areas right now.

Andrew la Fleur: Everything has arrived. I mean, downtown east side of the city of course, downtown East for condo investors was always like the up and coming thing. But now again, look at downtown East. It’s almost caught up to downtown West. I mean, $1,000 per square foot versus 1100 dollars per square foot. Not much of a difference there right now.

Andrew la Fleur: Number five, taller towers are allowed equals more premiums. So, this is another point that for those of us who are in the industry, we sort of understand, but I find a lot of people outside the industry don’t. So, your point of insight for you listening, tall towers are much more expensive to construct than shorter towers. And obviously, taller towers are going to command a much higher average price than a shorter tower. That the higher up you go in a tower, the more premiums that are going to be associated with that height, and with those views.

Andrew la Fleur: Typically, 1000 or $2,000 a floor is normal in most buildings. So, if you have a 65, 75 storey tower, you’re getting much higher overall pricing than if you have a 40 storey tower. Also just from a construction standpoint, I’ve been told by builders, specifically on a construction side. Once you go above 50 storeys, it becomes a much more expensive, and much more complicated from an engineering perspective, to build such a tower, and therefore, developers have to charge significantly higher pricing to account for the higher costs that are associated with crane technology, and accounting for wind, and sway, and foundation aspects of it, earthquakes and all that sort of stuff.

Andrew la Fleur: And just getting materials, and things above 50 floors is more complicated, more expensive than building a 60-storey building is much more expensive than building a 40-storey building. And so as we get more and more of these super tall towers, which we are that again is just pulling up the average prices for the whole market overall.

Andrew la Fleur: And again, that is going to continue as builders are running out of sites to build towers downtown that they do have, they are increasingly under more, and more pressure from their investors, and their shareholders and their stakeholders to get higher, taller buildings, more expensive buildings so that they can get those to get that return on their investment for buying that very, very expensive downtown land.

Andrew la Fleur: Number six, lack of transit improvement and long commutes. It gives you a downtown condo premium. So absolutely, the transit situation in this city is pretty depressing when you start to look at it, and think about, and look at how many years, and decades that we debate transit and building new transit in the city before actually doing anything. And meanwhile, the population continues to just absolutely grow exponentially.

Andrew la Fleur: I mean, everybody has that start. Anybody who’s lived in the city if you know exactly what I’m saying, if you’ve lived in the city for 10 years or more, and you remember, and you can pair back driving around this city 10 years ago, even six, seven years ago compared to today, there’s a significant and dramatic difference in the ability to get around the city. It was much, much easier 10 years ago than it is today. And it’s only getting worse, and worse, and worse every year. It’s, we’re just adding more, and more, and more people, more, and more, and more cars to this region.

Andrew la Fleur: Meanwhile, how many new subway lines have we added? How many new roads have been built in the GTA? How many new highways have been built in the GTA in the last 10 years? Zero. How many people have been added to the GTA in the last 10 years? Approximately 1 million. Okay, how many new subway lines have we built in the last 10 years? I guess one than the one then the one just opened up to York University, the subway extension there.

Andrew la Fleur: How many people are using that? Obviously the numbers are extremely low, and will continue to be extremely low on that line until the residential component is built up around that. It’s going to take … Just like the shepherd line was empty for the first five years, 10 years and now it’s only just starting to sort of get some ridership on it. We’re seeing the same pattern on that other line as well. It’s going to take years for that development to catch up to that infrastructure there that they’ve built.

Andrew la Fleur: So again, what it results in is, people want to live downtown. People don’t want the long commutes. There’s more, and more pressure, and more, and more demand to live and work close to each other. So, that means downtown condos will command over time, a bigger and bigger premium over non downtown condos at least until we start seeing significant sub markets, and sub alternative downtown so to speak, being built up over the next decades to come.

Andrew la Fleur: Number seven, longer approvals process. Higher carrying costs for builder. So, it’s taking longer, and longer, and longer to go from, as a builder, to go from buying a piece of dirt to getting a shovel in the ground to start building the actual condo. Some builders say it’s as long as a decade for sites downtown to actually get it purchased, rezoned, site plan approvals, building permits, yada, yada, yada and the list goes on and on.

Andrew la Fleur: It’s years, and years, and years. If you have to go through the OMB to get approvals. You know that? I’ve personally seen projects as long as like, three years of waiting to just get through the OMB process, and get an actual ruling, and an actual result to see if you can actually build the thing or not.

Andrew la Fleur: This is just continually getting worse, and we have this huge backlog of projects, and units that would otherwise be already in the pipeline, but they’re not approved and they’re just waiting, waiting, waiting, and that time is just getting longer, and longer. Adds to the carrying costs for builders, adds to the risk that builders have to undertake. And that ultimately, just adds to the price, to the cost that the consumer has to pay for that condo unit.

Andrew la Fleur: Is this going to get better? Very unlikely. If anything, it’s only going to get worse in the years to come.

Andrew la Fleur: Number eight, construction costs rising. This is a big one. Just the sheer cost of building has gone up so significantly. Labor costs are a huge part of it. Material costs we have, the steel and tariffs and trade wars issues with Trump that’s affecting things a little bit. I think the big piece here from what I understand and talking to builders again, is really labor. We have a shortage of skilled labor in this town. If you’re a young person and listening to this, you’re looking for a career, you know again the message is the same thing that I’ve been hearing since I was a young person is, get into the trades. Get a skill.

Andrew la Fleur: You’re going to do very well, and you can easily make a six figure income with a lot of these skills that only require a couple of years of training, because there’s just such a shortage of demand of people who are wanting to work with their hands. There’s such a shortage of supply, I should say, of have that available labor. And that’s really driving up costs in the city.

Andrew la Fleur: It also just, again, prolongs. How long the construction process takes. If you can’t find that skilled labor to do that job to get that thing built, it takes longer and longer to build a condominium then, the cost of that thing will get higher, and higher as builders have to account for that time.

Andrew la Fleur: And again, it’s only going to get worse as those demands continue to rise. Unless we see a dramatic culture shift, and massive numbers of young people going into the trades, and a huge influx of skilled labor, which is not going to happen overnight. It’s going to take years for any change like that to happen.

Andrew la Fleur: Or, it would take a dramatic recession, or something where that would suddenly shift the supply and demand dynamics, obviously, of the labor market. But again, short of that happening, it’s going to continue.

Andrew la Fleur: Number nine, land vendors not compromising on price. Land vendors who don’t compromise on the price. So, this is something we’ve been hearing about forever. A lot of the people, a lot of the land owners, especially in the downtown core, have owned their properties for, not just a couple years, a few years, a decade. It’s been many decades family-owned, passed down properties. It’s a very common thing.

Andrew la Fleur: So, builders are trying to negotiate with increasingly savvy, and smart property owners and land owners who are not, it’s not like the old days where you can just knock on the old lady’s door, and say, “You know, Hey, I’ll give you a great deal for your house here.” And then you put up a 50 storey building or whatever. Or you just for a packing lot, and you call the guy who owns the parking lot, “Hey, I’ll give you a million bucks for your parking lot.” People are smart.

Andrew la Fleur: They know land values, they know condo values, they see the future of the city as well. Nobody’s in a hurry to sell. Everybody is holding on to their price. Sure, I’ll sell if you give me this outrageous price. So, the bar keeps getting higher and higher. What was once outrageous two years ago is now the norm today, and tomorrow will be a bargain.

Andrew la Fleur: So, through the ups, and downs of the market over the last 10, 15 years, one thing’s been consistent. And that is land values, and prices of land, especially downtown core just getting higher, and higher, and higher. And a big part of that is again, just the culture, and the savviness of land owners, especially those guys who’ve owned this land for many, many years and decades, just not compromising on the price.

Andrew la Fleur: And do you think that’s going to change? No way. I mean, a lot of these properties, there’s all mortgages on them, they’re paid off many years ago, parking lots. If you own a parking lot, or a small lot or something somewhere, you’re getting tremendous revenue from it, even if you have a mortgage. I mean, you’re no hurry to sell. Why would you sell for $10 million today, when you know that in five years, it could be worth 50 million, right?

Andrew la Fleur: And so people understand this now. It’s different from how it was 20 years ago where people were like, “Oh, I’ll sell today for a million ’cause if I wait five years, it might just get 1.2 million, right?” It’s very different now.

Andrew la Fleur: Number 10, higher development charges. Development charges, huge factor in condo prices, and they have gone up significantly. They’ve recently doubled in the city of Toronto. All the taxes, park levies, section 37, educational levies. Everything is going up, up, up. There’s huge pressure. The city is just trying to milk the cow like the golden goose.

Andrew la Fleur: There’s so much. I mean, as much as I think 25% of the cost of a condo is just taxes, and goes to the government, the various levels for different things. I mean, the government’s on one side of the mouth they say they want affordable housing, and on the other side of the mouth they say, we want more taxes from you, the builders aka you the buyers of the condo. I mean, all these things are just passed on to the individual buyers, right?

Andrew la Fleur: Builders are not absorbing these things. They have set returns they have to make. They pass these costs along to the buyers, and the buyers are paying them, ultimately. So that is only going to continue. Cities are broke. They have no money. They’re constantly looking to raise more revenue for everything that is constantly going up, and always being behind, and never being ahead of the game and development will continue to bear the big brunt of that.

Andrew la Fleur: Number 11, Toronto land transfer tax. The Toronto land transfer tax now has been in place for I guess, more than a decade. I think 2007. But again, why is that a factor? Well, that’s a factor because it’s a friction point for people looking to move. If you’re looking at moving, and you look at the cost of moving in this city, it’s astronomical.

Andrew la Fleur: I mean, the average cost to move if you live in Toronto from one house in Toronto to another house in Toronto. If you did the math, it’s probably around $100,000. If you want a big house, bigger than average, and more expensive than average. It could be 150, $200,000 when you talk about land transfer taxes plus selling commissions, moving costs.

Andrew la Fleur: When you move, you buy new furniture, you do renovations everything and everything else. It is astronomically expensive to move in this town, and land transfer tax is a huge factor that people are causing people to think twice about moving. And when you think twice about moving, and you decide to stay in place, that’s one less available property for sale.

Andrew la Fleur: It’s affecting the supply, and it has affected the supply dramatically through all the ups and downs of the market over the last decade, one thing’s been consistent is this, unbelievably low and perpetually low supply of available properties for sale, especially in the core of Toronto. It’s just perpetually, a seller’s market. And that’s driving up prices. A big reason for that is the land transfer tax that has been.

Andrew la Fleur: Number 12, Higher interior specs demanded for a unit. So, you can’t buy a crappy condo anymore. You can’t buy a condo with laminate countertops. You can’t buy a condo with eight foot ceilings. I mean, it occasionally, condos are very hard to find. Like the specs and what consumers are demanding. The standard is so high, the basic standard.

Andrew la Fleur: Like, if you come out as a builder with crappy specs like, nobody’s going to buy it. So, the rising expectations of the buyer again, has driven up prices as well. And that will only continue. People aren’t going to take a step back suddenly, in what they’re expecting and demanding. It’s just going to continually be demanding more and more.

Andrew la Fleur: Number 13, rents have increased drastically supporting investment buying. That is absolutely true. So, as rents have increased so much in the past few years that, that will obviously support more, and more investors getting into the market and supporting the market. More, and more demand to buy from the investment community. People see their friends, and neighbors making money, and more, and more people want to get into that, and get a piece of the pie. And so, more demand is driving up prices. That’s that’s again, we talked about this.

Andrew la Fleur: And time and time again, rents will continue to rise significantly. So, therefore, that factor will continue to be true moving forward.

Andrew la Fleur: Number 14. Most low hanging fruit condo sites are gone. Absolutely true. Again, where have all the parking lots gone? There’s hardly any surface parking lots anywhere in the downtown condo, let alone anywhere in the city. Those days of just picking up low hanging fruit, grabbing a parking lot and putting up a tower. Very easy to build on a parking lot site, versus buying in between two buildings on a back alley and you’ve got historic components leaning against you.

Andrew la Fleur: I mean, construction is so much more complicated, and it takes so much more time and so much more cost to builders all driving up prices. That’s only going to get worse as the city is just more, and more built out construction sites getting more, and more complicated, and more, and more expensive to build on.

Andrew la Fleur: And finally, number 15. Thank you for sticking around with me till the end. Number 15, NIMBY resistance has pushed unit counts down resulting in less supply. So, NIMBY standing for, not in my backyard. So, people saying, “Do you want to put a condo up here near my house? No way. It’s going to ruin the neighborhood, blah, blah blah.” The city councilor says, “Yeah, you’re right. You are going to run the neighborhood. Please, vote me back in, and I’ll stand up for you.”

Andrew la Fleur: So, and nobody wants a condo in their backyard but ultimately, condos are going up in everyone’s backyard. It’s just the reality of living in a big, big city. However, with that push back, with that resistance, counselors and the city will bow to that public pressure and say, “You know what? Look, we saved you guys, the locals. They wanted to put 50 storeys up. We knocked them down to 25. High fives all around. Let’s go have a beer. Okay, vote me back in. Great.”

Andrew la Fleur: So, if it’s up to builders, obviously they’re going to put the highest density possible, the tallest tower possible. To talk to the public, they’re going to put nothing at all. And so generally speaking, it’s things are weighted against the builder, and more in favor of those opposed for political reasons. So that pressure has brought down the number of potential units.

Andrew la Fleur: The 50 storey towers should be they become 40 storeys, the 30 storeys become 20 and so on. The six story towers just don’t get built at all. So again, less supply than there otherwise would be. Is that likely to continue? Is that trend likely to keep going?

Andrew la Fleur: I think more than ever we’re going to see more, and more resistance and all these factors together. It’s just going to make it harder, and harder, and less and less attractive for builders to look at building, especially in the core of the city. So that is going to keep supply down, which will ultimately keep pushing the prices of what is out there up.

Andrew la Fleur: Okay, there you have it. That is today’s episode, the 15 reasons why prices have doubled, and why they’re going to double again. I hope you enjoyed this episode. Once again, make sure that you’re getting my weekly email updates on the condo market by signing up at, dropping your name and email in there, and we’d love to be able to keep in touch with you that way.

Andrew la Fleur: If you found value from this episode, if you got anything from it that you thought was good. Go ahead, and share this with somebody that you know who you think could benefit from listening to it as well. Until next time, I hope you have a great week and happy investing.

Recording: Thanks for listening to the True Condo’s Podcast. Remember, your positive reviews make a big difference to the show. To learn more about condo investing, become a true condo subscriber by visiting