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Are we building too many condos in Toronto?

are we building too many condos in toronto?

Are we building too many condos in Toronto? Who can afford to buy a condo in Toronto at today’s prices? What will happen to condo prices and rents in the next few years ahead? Find out the answer to these questions and more on today’s episode as Andrew la Fleur breaks down the latest stats from Urbanation.

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Andrew la Fleur: Are we building too many condos in Toronto? Find out the answer on today’s episode.

Announcer: 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: Welcome back to the show. Thank you again for listening in. Once again, I am your host, Andrew la Fleur from, bringing you advice, information, analysis on the Toronto condo market since 2006 and in this podcast specifically since 2014. Thank you so much for listening. Thanks for spreading the word about this podcast. The listenership and the downloads continue to grow slowly and steadily, so I appreciate all of you who have taken the moment to either leave a review, a rating for the show, or to share this show with somebody that you know.

Andrew la Fleur: Before we jump into today’s episode, just want to let you know, depending on when you’re listening to this, if you’re listening to it when it’s published, we do have a free live event coming up that I would love to invite you out to if you’re a podcast listener, and you’re still not getting my weekly email updates, which by the way you can get by signing up anywhere on But if you’re for some reason not a fan of email or whatever it might be, and you’re just a listener of the podcast, but you’re interested in condo investing and learning about condo investing, and you’re interested in getting access to a great investment opportunity, I want to invite you out.

Andrew la Fleur: You’re welcome to bring friends, families, colleagues, anybody who might be interested. I want invite you out to our next free live event. It’s a chance to meet me, to hear from me. I’m going to be giving a presentation, and I promise to always bring serious value to everybody who comes to these things, so I think you’re going to get a lot out of it by coming out.

Andrew la Fleur: It is going to be on Saturday, December the 8th. If you’d like to register, just go to,, and there you can register for our next free live event on December the 8th. The actual title of this event is called Fire Your Financial Advisor: How You Can Double Your Money in Five Years by Investing in the Hottest Condo Market in Canada. So hope to see you there.

Andrew la Fleur: Now, jumping into today’s episode, I’m going to be talking about, are we building too many condos? As I said in the intro, that’s the main thing I want to look at, but specifically what this is, I want to share with you some of my thoughts and observations and quick takeaways that I took from Urbanation’s latest webinar. Urbanation, if you don’t know, they track the condo market. They’ve been doing that for decades now. Shaun Hildebrand and Pauline Lierman and others from Urbanation have been guests on this podcast many times, and we use a lot of their data and insights to understand what’s going on in the condo market, in the housing market in a broader sense. They are just amazing at what they do.

Andrew la Fleur: They started doing these webinars, and I think this was their first one of hopefully many more. It was about a 45-minute webinar, just jam-packed with great information and stats, knowledge, insights, trends on what’s happening in the condo market. So I wanted to just share with you five or six points that stood out to me from that. The first one is the answer to the question that so often comes up, and that is are we building too many condos? You probably heard this at cocktail parties or around the water cooler at work or just general chatter out on the interwebs. This is something that’s been consistent forever. There’s always this debate in Toronto, it seems, are we building too many condos? And there’s always these loud voices that are out there screaming from the headlines or wherever else, the interwebs, the Twittersphere, that there’s too many cranes in the city. We’re building too many condos. This is clearly a bubble, and it’s all just going to come to a horrible end.

Andrew la Fleur: But the evidence continually suggests quite the opposite. So the answer to the question, are we building too many condos, looking at what Urbanation is saying from their latest stats and analysis, the answer is definitely no. In fact, not even close are we, not even close to building too many condos. In fact, we are still perpetually building too few condos. And hence, that is why prices continue to keep rising. Hmm, funny how that works. Supply, demand, prices. Once again, economics 101, but we so often just listen to that media chatter, and we so often listen to those voices around the water cooler, whatever it might be, that are saying there’s too many condos. It’s not a good investment. Don’t buy a condo, you crazy fool. A couple years go by, and that crazy fool just made a crapload of money, and you’re sitting there on the sidelines continually.

Andrew la Fleur: So what’s going on here? Well, again, it’s a numbers game. Won’t go into too much detail, but basically it’s quite simple. Urbanation breaks down in this webinar to say, based on population growth in the Toronto area, we need about 20,000 new rental units produced every year, and from the condo market, we are finishing currently on average, I mean, it’s going to vary from year to year, but on average we finish about 20,000 condos a year. Out of those 20,000, we have about 10,000 that are, on average, about half of them will be rented out, and about half of them will be owner-occupied. So we’ve got about 10,000 rental units there. And then the purpose-built rental side, if you break down the numbers, we’re expecting on average around 3,000 for the next few years, purpose-built rental units to be added to the market.

Andrew la Fleur: So 10,000 plus 3,000 is about 13,000. 13,000 is new supply coming in, and 20,000 new units are what’s needed, just to keep up with population growth in the area. So we need 20,000, we’re only putting in about 13,000 on average, so it’s not even close. We need more and more condos. If you want to see prices level out, rental and also resale prices start leveling out, we would need a massive increase of new supply. And that is not in the forecast. So there you have it. We are certainly not building too many condos. That would be takeaway number one.

Andrew la Fleur: Next takeaway is just that the condo market overall, in order to understand what’s happening today, you gotta take a step back and look at the bigger picture of what has been happening over the past number of decades. Going back into the ’60s, ’70s, ’80s, ’90s, and up until today, there’s a multi-decade trend of people moving back downtown. This is something we talk about on the podcast a lot. It’s not just a Toronto thing. It’s in cities around the world, but most particularly, it’s in cities in North America. There is a big trend of people moving downtown.

Andrew la Fleur: Downtown Toronto has been historically over the past 10, 15 years the best place to invest your money. It’s where people want to live. It’s where people are going. But now, as I’ve been saying in 2018 if you’ve been following and listening to me, as Toronto has become more and more expensive, pricing out more and more people, we’re starting to see smaller centers in Ontario, smaller cities also undergoing the same trend. Your Hamiltons, your Kitcheners, your Ottawas, even London, Ontario, places like that. You’re seeing this trend of people moving, people interested in and actually moving back into the downtown cores of these cities. So I do believe that that trend that we’ve seen over the last many decades in Toronto, it’s going to continue, yes, but you’ll also start to see it in these other centers as well, and these other centers will also be attractive places to invest for the same reason.

Andrew la Fleur: Because it’s a flow. As the people are attracted to moving into the downtown core, then the companies are next. The companies follow where the talent is and where the people are and where they want to live. And so you’re seeing more and more office space and jobs being relocated to the downtown core, away from the trend in the ’50s, ’60s, ’70s towards everything moving out of the city and into the suburban areas, and you have these suburban office parks. That trend has been reversed, in recent years especially, and it’s been a slow process, but the interest now is gone mostly in the other direction, towards back into the city. So more people going to the city, the jobs, the office space. Urbanation talked about the record number of office buildings in the downtown core under construction, scheduled for delivery over the next three, four, five years.

Andrew la Fleur: It’s the old expression of “Follow the money.” The money is going downtown. That’s where you want to be if you are an investor. You want to follow that money trail in a general sense. Not always and only, but that, as a general rule, is a good place to start and a good way of thinking about it. That trend’s going to continue. We’re going to keep seeing people moving in the downtown core.

Andrew la Fleur: Another interesting point was GDP growth. Toronto GDP growth, and tied into this whole thing about the job market and commercial office buildings, Toronto GDP, it’s growing at twice the rate of the rest of Canada. Canada GDP growth over the past few years is around 1.8% on average, versus the Toronto GDP growth has been around 3.5%, so pretty much double. So again, if you’re a real estate investor, go where the jobs are, but more importantly, go where the job growth is happening. If there’s growth in that job market, then people are going to flow in there. Real estate values will follow shortly behind. That’s good news, and we do expect that to continue. Overall economy is great. Unemployment is pretty much at all-time lows right now as well. It’s a very healthy economy at the moment.

Andrew la Fleur: Affordability. Who is buying all these condos? That’s another question that comes up a lot, is how can anybody afford to buy these condos? You know, prices are just out of reach for everybody. It doesn’t make any sense anymore. This is all going to come crashing down, because no one can afford these things, so therefore, prices have to come down. Well again, Urbanation digs a little deeper into the data here and looks behind the headlines. When you do that, what you find is that yes, prices have risen a lot, especially in the downtown core. Yes, on the surface it does seem like things should be unaffordable. But as we said on this podcast for many years, it’s actually a case of Toronto was extremely, and really still is, underpriced and a little bit, maybe, too affordable, compared to most other cities around the world.

Andrew la Fleur: What you find if you peel back the onion a bit is, you need about $100,000 to afford the average condo downtown. To get into the market, you need about $100,000 income to do that, whether it’s you by yourself or your household income. As we know, probably most buyers are in a household income sort of situation where there’s multiple incomes being used to purchase that property. So you need about 100,000, and what they show in the webinar is that they estimate the average downtown income, household income downtown, is actually about 125,000. 125,000, so that is a number that is significantly higher than the GTA as a whole, which is … I don’t have the numbers here, and they didn’t share them, but it’s probably closer, last stats I’ve seen, probably around 70,000 or so is your average GTA household income. So the average downtown Toronto income, 125,000, which is actually interestingly more than enough to be able to afford a condo downtown.

Andrew la Fleur: But another angle that I always look at when people ask me this, who can afford to buy these condos? Who’s buying all of these things? It’s important to point out that the people that are buying the new condos that are being sold today, most properties out there that are in the world are not for sale. They are properties that were purchased a long time ago, anywhere from 60, 70 years ago, somebody who’s 90 years old and they’re living in that same house they bought 60, 70 years ago, up until somebody who just bought a house yesterday. But the average ownership time in the GTA of all properties that exist is … I don’t know what it is, but the average is probably 10, 20 years, something like that is the average amount of time.

Andrew la Fleur: So the average person bought a house a long time ago, is my point. The average income is around 70,000, and the average person bought a long time ago. So it was affordable when they bought, but who’s buying today? The properties that are transacting today are these at-the-margin sort of type properties, if you think about it like that. They are not average people who are buying these properties. The people who are buying these properties are not the average. You gotta stop thinking about it like that. New properties that are being sold today, they don’t have to be priced at what the average income person can afford. That’s not how it works. It’s just what the average person who doesn’t already own a property can afford.

Andrew la Fleur: And what you find is, again, that the average income downtown is $125,000. That number is probably shocking to a lot of people listening, but that is a true number. Facts are facts. Again, the average income downtown can more than afford the average condo downtown, so just based on that alone, you do start to sense that there is room for prices to continue to grow, just based on that alone. And if wage growth continues as well, which it is growing at the highest rate it’s been growing in a number of years, they showed too, then prices will naturally keep rising if that is the case, because people can still afford to buy theses homes at today’s prices.

Andrew la Fleur: Another interesting point was, they brought up the new versus resale. They compared new condo prices, pre-construction condo prices, versus resale condo prices, and what they showed is that the gap between new and resale is at one of the largest points … I don’t know if they said specifically the largest ever, but it’s grown significantly from what it was a couple years ago. If the average resale’s about $1,000 a square foot, for example, the average pre-construction downtown is about $1,200 per square foot. So that’s a pretty big gap between the two.

Andrew la Fleur: A few things to point out. Number one is that, and reasons behind this from my perspective, is number one, costs to build are way up, the construction costs, land costs, development costs. Time required to actually get a site approved and shovels in the ground is much longer than ever it was, which all adds up to more costs. The cost to build a condo is much, much higher than it was even just a year or two ago. Certainly five, 10 years ago, it’s exponentially higher. Costs of labor and materials, everything, all the costs are up. So therefore, developers cannot afford to price condos for anything less in the downtown core than around 1,100 bucks a square foot. It’s sort of now the floor, the basement that they can afford to price a condo downtown.

Andrew la Fleur: The second thing is that, in my opinion, there’s a lot more higher-end projects that are out there in the market right now. You’ve got projects downtown that are 1,600, $1,800 per square foot, which is naturally going to skew the average price of all new condos a little bit higher than it typically would be. But really my main takeaway that I want to give to you the listener on this is what I call my 95% rule when it comes to condo investing. My rule is that 95% of all condos that are out there on the market at any given point in time are not worth investing in. They’re not good investments. So it’s so important to work with an expert agent who knows what they’re doing, who has a track record of success and who knows how to differentiate between the condos that are going to be a great investment, the condos that are going to be an okay investment, and the condos that are going to be a crap or perhaps even a terrible investment.

Andrew la Fleur: That’s again, shameless plug, but that’s exactly what I do. Hopefully, if you’re familiar with me and this podcast and, you already have a sense of that, but if you’re new here, that is what we’re all about. We help investors find those 5% condos that break the mold, that will give you great investment returns, and ultimately that you’re going to beat the market. We’re not looking to get average returns. We’re looking to get above average returns. Obviously, like I said, I’ve been doing this for 12 years now, and I have a very good track record of doing so.

Andrew la Fleur: Urbanation also talked about their stats, which got a lot of headlines earlier this year. They did a study with CIBC, which according to what they put together, it showed that approximately 45% of all condo investors were cash flow negative. 45% were cash flow negative on a month-to-month basis on their condo investments. And again, this ties into this whole notion that most people buy the wrong condos. Most investors who are so-called investors are just not doing it right. They’re buying the wrong condos in the wrong buildings in the wrong locations, the wrong layouts, and the results speak for themselves. A huge chunk of these people are experiencing negative cash flows.

Andrew la Fleur: Meanwhile, our investors, by and large … I don’t have a definitive statistic on it, but I would venture to say that 100% or very, very, very close to 100% of my clients who purchase with me, the many hundreds of them over the years, are all going to be cash flow positive on their units. Certainly my own personal portfolio, I can without hesitation say that 100% of my condos are cash flow positive in a big way.

Andrew la Fleur: If you believe that stat, that 45% of condo investors are cash flow negative, that means a lot of people, again, just don’t know what they’re doing. They’re getting bad advice, or worse, they’re getting no advice, and they’re just going out and buying properties that are not good for investment. So make sure you get yourself, whether it’s me or somebody else, make sure you do have somebody helping you invest smart and right. You want to obviously not be average. You want to be above average, beat the market.

Andrew la Fleur: And finally, the question is, what will happen in the future? Bust out the crystal ball. Everybody wants to know what’s going to happen next? Where are prices and everything going? What’s going to happen with rents and prices moving forward, according to this presentation from Urbanation? Well, what I took from it was that we can expect higher prices, we can expect higher rents, in the short term and most certainly in the long term as well. But they are resonating with what I’ve been telling investors for the last year and a half, which is don’t get used to these high double digit increases in prices, these double digit increases in rents. Don’t get used to it. It’s not normal, it’s not sustainable, as Shaun said a couple times in the presentation.

Andrew la Fleur: We do expect prices and rents to return to more normal levels as more supply is added in the next two, three years. There’s potential. You never know, because construction schedules of new condos are so up and down and variable, and there always are delays. But there may be some years, in the next two or three years, there may be a year where we do get 30,000 condos completed in a single year. Again, I’ve been watching this for 10 years now, and there’s always supposed to be this one year where we get this massive flood of new product onto the market, and that will have a dramatic effect on prices and rents, people say. But it just never happens. The evidence seems to suggest that we do have a construction maximum, a construction threshold, a construction capacity in this city, where we can only actually complete, just because of labor shortage, we can only complete around 20,000 condos per year.

Andrew la Fleur: Like I said, for the past 10 years, there’s always been this year, it’s usually two years away, on the horizon, where you’re supposed to get this big huge flood of new condos all finishing at the same time. It’s never happened. What always ends up happening is these completion dates keep getting pushed further and further back. After a decade of watching this, I can only conclude that we just don’t have enough labor to complete more condos than we’ve already done. Like we’ve given it our best shot for 20 years, and we’ve never really been able to complete more than 20,000 units. So it just doesn’t seem to be a number that we can get significantly higher than.

Andrew la Fleur: But that being said, you never know. It could happen. If it did happen, if we do get a 30,000-unit completion year, then that would probably slow things down in the market. Prices may come down a bit, rents may come down a bit in such a year, if that were to ever happen. So that’s something to be aware of, but that would just be a temporary blip on the radar, and we would go back after a year or so to what it was before. After that product gets absorbed, we’d go back to the usual year of around 15 to 20,000 units completed, and you have rents and prices going up again. So long term, very bullish. Short term, also bullish, but knowing that the price gains and the rent gains will probably moderate a little bit.

Andrew la Fleur: So there you have it. There are my takeaways from the Urbanation webinar, which was so great and valuable, and I do encourage you to check out their future webinars if you can. Just go to I’ll include a link to all this stuff in the show notes, and if I can, I’ll also include a replay of the actual presentation. I’m not sure if that’s public or not, but if it is, I will definitely include it on the show notes for this episode so you can watch the whole thing at your leisure.

Andrew la Fleur: Once again, for all the show notes for this podcast in all episodes, just go to You can find everything there. Okay, until next time, I hope you have a great week. Make sure you sign up for our live event. Once again, I hope to see you there December 8th. It’s going to be a great day, great chance to meet me and to learn. Yeah, until next time, happy investing.

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