Why Do Condos In Toronto Cost So Much? Here’s The Process
By Digital Aptech - Jan 06,2023
Have you ever wondered why condos in Toronto cost so much? The crisis of affordability in the General Toronto Area has everyone wondering about the cost of housing but new pre-construction condos in Toronto are a special case. By the time you know about all the steps in the process of building a condo in Toronto you might actually think that a condo is cheap and should cost much more! Just kidding, but here’s CondoHQ’s guide to the entire process.
At first a condo is just a glint in the eye of some ambitious homebuilder. The dream likely starts out very tall (maybe eighty storeys or more for the really starry-eyed) but comes back down to earth over time. Both large established builders and smaller “fresh on the scene” builders try to make it happen in Toronto. One tip that will serve you well: when buying a new pre-construction condo in Toronto check out the builder’s history. Building delays are inevitable but a long history of delays is a warning sign, as is a builder with no history at all.
When a builder moves from ambition to action, the first step in the process is what’s called “land assembly”. After all, land in a place like downtown Toronto doesn’t come assembled in perfect chunks fit for building a condo, multiple pieces of land have to be assembled together to form a workable footprint for a large building. The land assembly process can be alternatively tedious and exhilarating, tedious when a builder is “herding cats” and trying to nail down a “greedy” or absent landowner and exhilarating when the full picture starts coming together.
One thing to keep in mind is just how expensive land in the General Toronto Area is in the current day. So called “AAA” land on which condos are often built is astronomically expensive and just about no single person has millions of dollars of liquid cash laying around to throw at a risky project and those that do have the cash know it doesn’t make sense to put their own money up. And that’s why financing (ie. loans from banks or private lenders) becomes the primary concern at this stage.
The next step in the building process is the design of the building and applying for its approval. This is where developers run into a lot of roadblocks and complain that the building process is stalled and homes are made more expensive as a result. In Ontario it can be years before a municipality approves an application. Before a new pre-construction condo development can be approved it goes up for a deep review by municipal staff, the local council and various public institutions who are looking out for things like the environmental impact of the development. And keep in mind that development approvals are different from building permits and that the latter can take two whole years to obtain in Toronto.
More and more people now agree that the development process is too slow at juncture in the process and that is the context in which Doug Ford’s majority government has proposed legislation to deal with what they see as the delays created by an overwrought approval process. Others disagree and see all the approval, permits and reviews as necessary to slow rampant development. Whatever your position, the odds are that the development process will now become smoother for those trying to build new pre-construction condos in Toronto. All that said, it’s increasingly difficult to do so for other reasons this piece will discuss and the more significant outcome of the Ford government’s legislation is the building of plenty of new single family homes in outlying areas.
But let’s get back to the building process. Builders have to deal with provincial, regional and municipal levels of regulation, permitting and review. At the provincial level (the most powerful level of government involved, hence Doug Ford’s changes) there is an overall plan with targets of where growth is best located. The 2005 Places to Grow Act designated twenty five different urban locations as priority locations for growth. This plan was intended to serve as a guiding frame for municipal land planning and each urban centre’s official plan has to account for local rules as well as provincial ones.
As you can see, the design and approval process is rife with pitfalls. Builders often complain about how approvals are redundant, reviewed for no reason or subject to pointless delays in the process. And we haven’t even talked about the public’s contributions. Oh dear! Local residents associations are notorious for complaining about any new development and frequently have the opportunity to do so at various hearings and meetings. This is the point where the home builder’s original dream height of eighty storeys is often cut down to size. But let’s say that a builder gets all the approvals he or she needs, we haven’t even talked about actually building the building yet!
The trouble at this stage is that we live in inflationary times and the building process is no exception. Labour, in particular skilled labour, is increasingly hard to come by. The materials for building themselves are now very expensive (remember the great lumber price increases of 2021?). And building a new pre-construction condo is particularly expensive. In many parts of Toronto, especially downtown Toronto’s core, “just getting out of the ground” can be a matter of untold millions of dollars in labour, material and engineering costs. Are you starting to see why condos might be a bit pricey?
This is the stage known as “excavation” and what follows is “foundations and concrete slabs”. Basically you have to dig a hole and then prepare a base that can bear the weight of a huge tower. That’s not to mention accounting for all the essential infrastructure that feeds into a major development, you’ve never seen an overhead electric wire connecting to a condo have you? The next step is fenestration and exterior cladding. At the end of this step the building has taken its shape and what’s left is for you to customize the interior of your new pre-construction condo unit. Hopefully by this point you’ve gotten over the “sticker shock”.