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Could Toronto Ever Become Like Hong Kong?

Could Toronto Ever Become Like Hong Kong?

Andrew la Fleur just got back from a trip to Hong Kong. In this episode he talks about some of the key characteristics of a global powerhouse city like Hong Kong and how does Toronto stack up against a city like Hong Kong. More importantly he addresses the question that real estate investors need to think about: where is Toronto headed and could we truly become a city like Hong Kong one day?

Click Here for Episode Transcript

Andrew la Fleur: I just got from a few days in Hong Kong, which most people would agree is one of the greatest cities in the world. Now, Toronto likes to think of itself as on a similar level to Hong Kong, as one of the great cities of the world but are we really there or could we get there one day? We’ll answer that question on today’s episode.

 

Voiceover: 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. Thanks for listening in and thank you for your support, especially thanks to any of you who have left reviews for the show on iTunes.

 

I got a great review this week from Duncan Smith and Duncan says, “Even as an insider in the condo development industry, I find Andrew’s podcast to be full of useful information and would highly recommend it to anyone interested in the world of real estate investing, particularly those who are looking to get in the market for the first time. In a world where it can seem like everyone and their uncle is a part time real estate agent, it’s refreshing to hear someone like Andrew, who’s constantly working to master the industry in order to provide the best advice to his clients. A common theme throughout the podcast is to think critically and tune out the doom and gloom scenarios so often painted in the media. To that I would add it’s just as important to ignore the buy-buy-buy hype. Not all real estate investments are created equal and this podcast is a great place to learn some of the tools to help weed out the bad from the good. Keep it up Andrew.”

 

Well, thank you very much again, Duncan Smith, for that very kind review of this show. I really appreciate the support. Thank you for listening and supporting this show to everyone. Again, this podcast is all about informing you on what’s happening in the Toronto condo market and bringing you exposure to experts and industry insiders, on hearing what they have to say, people who you otherwise would not hear from or people that you just get little sound bytes hear and there, little one sentence clips in news article but without getting the full context, the full story. It’s also, of course, a place to learn about great investment opportunities and like you said, Duncan, it’s to weed out the, as I call it, the 95% of opportunities that are not worth investing in and finding the 5% that are worth investing in so thank you.

 

Okay, getting back to the topic of today’s podcast, one again, as I mentioned in the intro, I just got back from a great trip to Hong Kong. I’ve actually been there before but not since I was very, very small and so I really consider this my first time in Hong Kong and in that part of the world. It was a very interesting and eye opening experience for me, obviously, as someone who makes a living and does a lot of investing in Toronto and in high rise condominiums to go to a city like Hong Kong, which is known as sort of the high rise capital of the world. I believe there’s more high rise buildings there than anywhere else in the world so it was a great trip from that perspective for sure.

 

I wanted to just sort of reflect back on my time in Hong Kong. You know I have many listeners I Hong Kong as well and around the world so you might appreciate this especially but it’s a city that, you know, everyone would agree, Hong Kong is one of the great cities of the world and Toronto, we are constantly, you know wondering if we are on that same level, if we are one of the great cities of the world too, if that’s a direction that we’re heading, if maybe we’re already there. I wanted to look and do some sort of comparisons between Hong Kong and Toronto and look at what the future might hold for a city like us here in Toronto when you look at cities like Hong Kong and others that are further ahead, you could say, the development curve of being a city. I want to look at a few observations of Hong Kong and then sort of look at how it might reflect on us here in Toronto.

 

The first thing is, obviously as I mentioned, Hong Kong is an extremely vertical city. We talk a lot about, in Toronto, how the shift has taken place in the last 10 years from building out to building up with the introduction of the Greenbelt in 2005, Places to Grow legislation in Ontario essentially creating an island effect around the greater Toronto area of which, when you are in the Greenbelt, you cannot build. This has forced developers to stop just basically sprawling out and continuing to build low rise, low rise further, and further, and further away from the core of the city. More and more new homes are of vertical in nature as opposed to low rise so we’re building up instead of building out.

 

Now, if you think we have a lot cranes in Toronto, if you think we have a lot of high rises in Toronto, it’s just absolutely nothing compared to Hong Kong, as I mentioned. There’s just really, I mean it’s hard to describe until you’ve seen it. It’s just there are no houses, essentially, in Hong Kong. The entire city is vertical. The entire city is high rise. You could say, “How much does it cost to buy a house in Hong Kong?” There’s no such thing. There are no houses. If you could find one, it would be worth, you know the land it’s sitting on would be worth so many 10s of millions of dollars that it’s just you can’t even compare these 2 cities on that extent.

 

When you look at Hong Kong and how vertical it is and you look at the fact that everyone lives in high rise buildings and that is just the normal way of living. Everyone lives in small sized apartments as well. These are not large apartments for the most part. Families living in 300, 400, 500 square feet is normal. It’s not considered strange. It’s not considered unusual. It’s not a secondary choice if you can’t afford a home. It is your only choice. You are born in an apartment. You grow up in an apartment. When you move out and you start your own family, you are in an apartment. When your family moves out and you’re downsizing, you’re also in an apartment. It’s just that is the way of life in Hong Kong and many cities like that.

 

Compare that to Toronto. We have a long way to go, I think, Toronto. A great, great quote that I heard from a colleague recently in the industry, you know people say, “Look at the skyline,” and they just see so many cranes, “There’s too many condos going up,” and his comment was fantastic. He said when he looks at the skyline of Toronto all he sees are the holes. There are so many holes still in the skyline that need to be filled in and he’s right. That’s just a brilliant way to put it, that we have so much more room to grow. The downtown court is filling in nicely and it is really starting to look like a major world city, like so many others but we still have a lot of room for growth in the core over the next few years and that will only continue outside of the core as well. That’s the first point about the vertical city of Hong Kong and how it compares to Toronto.

 

The second observation main point that I want to talk about is that Hong Kong is a very international city. This is something that kind of surprised me in a way, caught me a bit off guard. One of the main things I noticed right away is that Hong Kong is an extremely international city. You’ve got people in Hong Kong, as you’re walking down the street, you really see people from all over the world on the street, Caucasians, Asians, South Asians, Africans, Europeans, a lot of Australians. It’s truly a global city and I thought that was very striking to sort of see and a characteristic of Hong Kong.

 

Now, how does that compare to Toronto? Well, I would say it’s still not even close to being as international of a city as Toronto and in all my travels around the world I have yet to find any city that comes close to the city of Toronto. I think the closest perhaps would be New York City but even New York City, if you spent time there, you’d probably agree that it is not like Toronto. The international feel, the sort of diversity, the global city kind of aspect of Toronto, I believe, makes us the unique city of the world from that perspective. I believe there’s no city in the world that can claim the sort of multiculturalism that we have here in Toronto and I believe that that is what makes us such an attractive place to be.

 

It’s both, I guess you could say, it’s both a cause and a symptom of the greatness of the city that more people from around the world come to Toronto because it’s international and because it’s a great city it’s attracting more people from around the world and becomes more international. It’s kind of a self fulfilling prophecy in a way. It’s a circle that just keeps on perpetuating. I think the latest statistics from the past few years more than half of the population of Toronto, are not born in Toronto now. The majority of people in Toronto are not from Canada. It’s a very unique time in history. It’s a very interesting city to be in. I don’t know if there’s ever been a city like that, certainly of the size of Toronto, anywhere in the world or in the history of the world.

 

It’s a very interesting thing to think about and I think it, again, is a key factor in our prosperity and I think it will be a key factor in our prosperity moving forward, I do think it might not happen this year, it might not happen in the next 10 years, it might not happen in the next 20 years but I do believe there will be a time in my lifetime where Toronto will be clearly recognized as one of the top 5 or 6 great, great cities of the world because of this aspect and because of the uniqueness of Toronto being a key factor in that. Again, it is a fantastic place to invest when you sort of think of it from that perspective that so many people around the world want to come to our city because of it’s attractiveness and we have an opportunity now to take part and invest in the city now before it sort of becomes this behemoth, global city.

 

The third observation I want to make about Hong Kong and compare that to Toronto, third thing is it’s a very expensive city. Now, you know obviously you see, probably looking at these observations and they’re not rocket science observations or anything but I think, again, the interesting thing is how these things came about and how it compares to Toronto. Yes, obviously, Hong Kong is a very expensive city. You probably know that. If you’ve been there, you obviously know that. If you know anything about Hong Kong, you probably assume that and it is true. It’s a very expensive city. Real estate, you look at comparing real estate markets to Toronto it’s like comparing, you know, Hong Kong to Toronto is like Toronto to Sudbury, or Thunder Bay or something. I mean it’s just night and day. They’re almost on different plants.

 

Hong Kong real estate, in many cases, it’s 10 times; not double the price, not triple the price, it’s 10 times the price of Toronto. It’s not even. They’re on separate spectrums. They’re on separate planets. I mean you can’t emphasize enough how different it is in terms of the price of real estate and the price of many things in the cities. Now, some things are similar prices but so many things are so much more expensive in a city like Hong Kong compared to Toronto. It’s a very expensive city but what’s interesting when you talk to people that live there and people that understand the culture, and the local politics, and everything that’s happening on the ground, it’s a very expensive city but there are very few rich people. Well, I guess there are a lot of rich people in terms of, it’s a big city so you have a large number of rich people but the vast, vast majority, 80-90% of the population are not wealthy at all.

 

In fact, they’re very sort of middle class or lower middle class. When you look at income levels, the vast majority of the population of Hong Kong, my understanding is, they are making sort of $40-50,000 a year. Very average to below average, kind of, wages are normal. It’s definitely a have and have not scenario in that city where you’ve got a small number of people at the top making all the money and then you have a huge amount of people at the bottom making little to average, just getting by sort of amounts of money. That obviously is not an ideal scenario to build a city upon. Again, when you compare that to Toronto, we have a very different scenario. We have a very strong middle and sort of upper middle class in the city with a very large base of people making a reasonable living and able to afford real estate and able to afford many, you know, a very good life, lifestyle, living in the city.

 

Now, what does the future hold for Toronto? Well, I think we’re definitely trending more towards a Hong Kong sort of model as many cities and many urban centers in the world are trending. That is, you know the rich will get richer and the poor, in a sense, will get poorer as the city becomes more expensive, as people are priced out of real estate, as taxes continue to rise, as service costs continue to rise, as inflation continues to increase the cost of living at a faster rate than wages are increasing for the average person. But again, the people at the top, the people who are sort of benefiting from the new knowledge based economy in a city like Toronto are going to do very, very well. They’re going to do, in fact, better, and better, and better and there will be more and more people in that sort of scenario in that bracket.

 

I do believe that Toronto will become close. It’s trending in the direction of a Hong Kong, of a New York, of a London where if you think the question today people are asking is, “How can anyone afford these houses? How can anyone afford these condos in Toronto,” well, you ain’t seen nothing yet, is what I would say. I think that that’s just the reality of any major world city is you have huge, huge amounts of wealth but they’re concentrated in a smaller and smaller percentage of the overall population. The rich continue to get richer. Getting a bit heady here, getting a bit esoteric on the podcast; I apologize if I lost you but what does that mean for condo investors? It means, again, we’re in a unique time in history here, I believe, where you can still afford to purchase real estate.

 

I always say you can buy a piece of property that you can live in that is 10-15 minute walk to the financial center of this country for $200-250,000. You can still do that today. You cannot do that in any other major world city anywhere. This is a very unique. We have a fantastic opportunity as investors to get these properties now that are, I believe, extremely cheap compared to what they will be, extremely cheap, obviously, compared to Hong Kong or any other city around the world. If you’ve got money sitting in the bank, if you’ve got money doing nothing in the stock market, now is still a great, great time to get that money into the real estate market. Jump in with both feet and get ready for a fantastic, fantastic ride over the next 10-20 years as Toronto, I believe, is really going to boom. Okay, that is the third point.

 

Now the fourth and final point is around transportation and how people get around in a city like Hong Kong. It probably comes as no surprise again that public transportation, subways, and buses, and taxis are how everyone gets around in a city like Hong Kong. Our obsession here in Toronto here with cars, and with making our roads bigger, and this debate about the Gardiner Expressway and what should we do with that, and the sort of back and forth between the car culture people and the other side, the public transit or bike culture, I mean again, if you look at what’s happening in other cities around the world, like Hong Kong, people do not have cars. Even very wealthy people do not have cars. They don’t drive.

 

If you have a car in Hong Kong you probably have so much money that you don’t even drive it, that you just have a driver who drives you around. Parking is so expensive in Hong Kong that, yeah, a lot of people that if they have a car they have a driver and they just get driven somewhere and the car never parks. The driver just drives around and picks you up sort of after you’ve gone to dinner or after you’ve gone to whatever you’re doing. Driving is an ultimate luxury in a major city, like Hong Kong. If you’re driving it’s very unusual. The vast majority of vehicles on the road are taxis. Taking a taxi around is relatively cheap. It’s definitely cheaper than Toronto.

 

It’s interesting to see again, what’s happening in Toronto. If we want to become a major world city, a global power house like a Hong Kong, or like a New York, or London we definitely, definitely, definitely need to invest way, way more into our public transit network. Yes, we’re getting the density. Yes, we’re getting more and more people living in the core and living in urban areas and being able to be closer to where they work and families are shifting from the mindset of always living in a house to living in more vertical living. It’s happening but it’s only going to be sustainable, it’s only going to be as successful as the infrastructure will allow it to be.

 

That is one area where I’m sort of skeptical, sort of concerned about Toronto and the growth, to be honest, is do we have the political sort of will power, the political ability to make the necessary investments into our public transportation network to make this happen, to make us sort of on the same level as some of these other cities like Hong Kong? Time will tell. Time will tell if that does in fact happen or if we are sort of destined to always be a sort of car centric, at the end of the day, car centric city, at the end of the day. Time will tell which way that goes but either way the future is looking very good for Toronto real estate and Toronto real estate investors.

 

Okay, that’s enough for today. Hopefully you enjoyed that. Hopefully there were some insights in there that you found interesting, especially if you’ve been to Hong Kong. I’d love to hear from you your thoughts on the city and your thoughts on how it compares to Toronto and how we, you know, will we become like Hong Kong? I’d love to hear your side of it too so feel free to send me an email, Andrew@truecondos.com, anytime and I’d love to hear from you. Okay, until next time, I hope you have a great week and we’ll talk to you soon.

 

Voiceover: Thanks for listening to the True Condos 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 truecondos.com.

 

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