Housing market demand depends on location

Analysts forecasting a drop in Montreal condo prices. New unsold condos  piling up in Toronto. Vancouver home resales falling to the lowest level in July  since 2000. The headlines appear grim, when it comes to the housing market in  Canada’s three largest real estate markets. While concerns about condo  overbuilding are not lost on developers, demand still exists for mid-priced  projects near public transit and other services, says Jordan Dermer, a managing  partner at CD Capital Partners, which has real estate projects in Toronto and  Montreal.

Dermer, a native Montrealer who worked in asset management and office leasing  at the former Trizec Properties, tells Gazette real-estate reporter Allison  Lampert how he chooses his projects and where he suspects there may be a surplus  of new condos.

Q: How do all these reports/media articles influence your decision to  go ahead with, or back away from projects?

A: All of these reports and statistics force us to be as disciplined  as possible in our underwriting of projects. The numbers need to work with  reasonably achievable assumptions and if you have to be aggressive with your  timing, costs and revenues to make a project look good on paper then it’s the  wrong project. Developers typically like to have a Plan B so that if they miss a  cycle there are options to mitigate the risk and/or hold the property until the  next cycle. Examples of this could be the phasing of a project, leasing an  existing building or operate a parking lot if the entitlement exists. A  developer’s ability to manage risk well will be a virtue in these uncertain  times.

Q: How many opportunities really still exist in Montreal and Toronto,  despite the concerns regarding overbuilding in both markets?

A: At this point we will be patient and wait for the right  opportunities as we have enough in our current development pipeline to keep us  busy for a while. Location, public transport, demographics, price point and  competition are all highly important factors in assessing a site.

In Montreal, Ma Condos – located in Le Triangle (near the Namur métro  station) – was an opportunity to invest in an area that offers excellent value  for its location (priced in the range of $300 per square foot). The city of  Montreal has also recently announced its intention to invest in excess of $55  million in the revitalization of Le Triangle (infrastructure, bike paths, parks,  street lighting, pedestrian areas, public spaces) starting in Spring 2013.

In Toronto, we have a large project at Yonge and Eglinton, which is a great  example of an area that irrespective of cycles will continue to flourish over  the long term because people of all ages will continue to want to live there.  With the new Crosstown LRT to be completed by 2020, the Yonge-Eglinton node will  have the best public transportation of any area in the entire city. The area  also benefits from great retail, office, services and restaurants and there are  several projects in planning, including ours, which will increase the retail  offering tremendously with even the talk of a major shopping centre to be  developed on the southwest corner of the intersection.

Q: We’ve heard a lot of recent announcements for new condo projects in  Montreal, and are expecting a few new ones in Toronto. How many of these  projects will actually come to fruition?

A: The easy answer is that these projects are achievable when presales  are at 70 per cent and a bank is prepared to finance the construction. I cannot  predict how many of these projects are actually achievable, however I think that  those developing in the high-end markets in Montreal and Toronto should be  cautious as I believe a surplus may be developing in both markets.

alampert@montrealgazette.com

Read more: http://www.montrealgazette.com/business/Housing+market+demand+depends+location/7048983/story.html#ixzz23AQRGVgM

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One response to “Housing market demand depends on location

  1. We’ve all heard all about how the housing market has been altered, but one question that is on the minds of everyone buying and selling in this sub-par climate is how does the housing market demand differ from location to location?

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