Global Toronto

Toronto Tops North American Crane Count, and There’s 400 More Projects Proposed

Toronto has a whole lot of real estate development going on. Rider Levett Bucknall (RLB), a large real estate consulting firm, released their quarterly crane index. The index puts Toronto at the top of the high-rise construction pile in North America. Actually, Toronto is beats the next closest city by a huge margin… that’s not always a good thing.

About The RLB Crane Index

The RLB crane index is a survey to count the number of high-rise cranes currently deployed. Mixed use, commercial, and residential are all counted in the total. RLB only conducts surveys in markets they do business in, so there’s some notable holes in North America. Off the top of our heads, Vancouver and Miami are not included – two spots known for having a lot of construction. We’ll have to pull the data for those cities on another day. Now, let’s look at their survey.

Toronto Leads North America For Crane Count

Topping the list on the RLB crane index is Toronto, Seattle, and Los Angeles – in that order. Toronto had 97 construction cranes at the end of Q2 2018, up 9 cranes from the previous quarter. Seattle had 65 cranes in Q2, up 20 from the previous quarter. Los Angeles had 36 cranes at the end of Q2, the same number from the previous quarter. Yes, Toronto has almost over 40% more cranes than the next city on the list.

North American High-Rise Crane Count

The RLB Crane Index includes high-rise cranes currently deployed, in North American markets.

Source: RLB. Better Dwelling.

 

Over 400 More High-Rise Projects Proposed For Toronto

Toronto’s construction boom is led by residential projects, and is set to expand. Nearly 86% of the 97 cranes are residential projects under construction. The high crane count could continue to rise as well, since another 400 projects are proposed. Not a huge surprise for everyone that knows Toronto is at record levels of construction. The count confirms a lot of supply will hit the market relatively soon, with even more supply to come.

Toronto’s crane count isn’t a problem right now, but it does indicate some headwinds in the future. Residential real estate prices soared,  and led to a rush of new projects to cash in. This rush is typical of the late stages of a real estate cycle. The massive influx of supply is likely to place downward pressure on prices, wiping out significant home equity. No surprise one of the world’s largest banks calls Toronto the “world’s largest real estate bubble.”

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20 Comments

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  • Dave 4 months ago

    Holy crap, that beats out most Asian cities. To contrast, the next city up in the world was Sydney last year. Once supply started to hit the market, this happened.

    http://www.dailymail.co.uk/news/article-5513959/Sydney-property-prices-fall-30-housing-bubble-starts-burst.html

    • Nat 4 months ago

      Australia is in the same boat as Canada. Both have extended business cycles that were extended by inflating household debt to 2x their peers. They’ll both need a severe recession to correct the unreal expectations that have developed since then.

  • Tara 4 months ago

    If there’s so much construction, why are condo prices going up?

    • SUMSKILLZ 4 months ago

      Due to a huge gap between sales and delivery? People have to live somewhere in the meantime while they are waiting for their unit. In a sense they are occupying two apartments/condos. There just aren’t enough places to live in the city, so scarcity bids up prices of rents and condos.

    • Al Daimee 4 months ago

      The impact of this volume of supply will impact the rental market much more than actual condo prices as many of the units under construction have been purchased by investors, many of whom are going to be long term landlords. Yes, there will be some flipping on assignments, but that activity is only a small portion of the resale market.

      There is a severe shortage of *desirable* rental supply, as the bulk of the 20s-40s working demographic want to live in newer condos within city centres, closer to their job to reduce commute time or simply to have more variety of things to do after work, even if their job takes them out of downtown (the reverse commute behaviour can be seen by the highway traffic going OUT of downtown Toronto, which has increased over the past decade). This will make middle aged condos (6-15 years old) push lower in rental asking prices relative to size, giving more choice to the rental market, as well as the buyer market. That’s a good result of our construction activity. Supply is needed. Really!

      New condo rentals appeals to those who don’t have the savings for a downpayment, but the income to support the mortgage they would have if they did have the downpayment. Hence, the tenant being willing to pay premium rental prices, further reinforcing the desire for investment buyers, especially with rental rates shooting up thanks to the Ontario Government’s Fair Housing Plan (rent control has given way to a demand for a higher base rent to offset annual rent increases in the CPI Index).

      The current activity is also not completing all in one shot. The 400-ish proposed plans are also not all going to actually be built. Some of those proposals will be rejected. I have seen launches fail to sell enough units to get built. Some of the land will remain undeveloped and shall trade hands between developers who will hold off for the future should the appetite for new construction purchasing wane. For now, there are plenty of new condo launches hitting the market, some are mid-sized infill projects and others are behemoths (1 Yonge St., Sugar Wharf, the twin Frank Gehry towers at King & John are examples of these).

      Lately, I have been getting introduced to a lot of Europeans who are migrating here for IT work. The argument we are “cheap” tech labour is not true. These migrating IT people are being paid quite well… maybe not Silicon Valley money, but $150K+ incomes are not uncommon to see on rental applications that my group have received.

      • Grizzly Gus 4 months ago

        Hey Al,

        Do you think that all of the cranes in the sky represent presales that were done before B-20 and rate hikes?

        Hope the investors can still close and are willing to be long term landlords if cash flow goes more negative and the appreication stops. What are you thoughts?

        • BlueStreak 4 months ago

          No doubt these cranes are pre B20. Banks require 70% presales before they advance their financing.

          BTW. I work for a homebuilder in the GTA. We are very bearish on the next 1-2 years. If we sell/build even 25% of what we have built over the last 2-3 years, we’ll give each other a jumping high-five.

          • Joe 4 months ago

            Does that mean renovations/building of new homes will be cheaper since there is less demand?

          • Bluetheimpala 4 months ago

            The bubble doesn’t just apply to the asset but the feeder industries…contractors will be begging for work in 6-12 months. Tick tock.

          • BlueStreak 4 months ago

            The low rise industry is still building what was sold as far back as 2015 but we expect things to aggressively taper off over the next 6-8 months. As
            Bluetheimpala said, the supporting trades will be out of work en masse starting with forming/framing/bricklayers. We’re already finding it much easier to source labour for the remaining of our homes in queue and it will only get easier and also when they’re no longer needed.

            IMO, this “lack of supply” is coming online in a big way. If you drive through the communities in the outskirts of the GTA that were built up over the last two years, you’ll see many empty houses, for sale signs etc. 99% of these resales have never been occupied and have asking prices that have severely undercut current builder asking prices.

        • Al Daimee 4 months ago

          Hi, Grizzy Gus. (Sorry for the delayed reply. I ddn’t have a chance to sit down and write a response until now.)

          There will be some impact of B-20 and rate hikes for those who were borderline to begin with, but these people shouldn’t have any business investing in secondary properties if that was the case. If the buyer fails the stress test, there are alternative options available to get financing, so the B-20 rule is not as severe as one would think.

          The option to sell on assignment is available to those who have that clause in their agreement should a pre-con buyer not be able to close on. Assignments are more easily marketed outside of MLS, thanks to more awareness via social media marketing channels and modern day e-mail marketing . There is a demand for assignments as an alternative to the limited quality inventory available in the condo market today.

          There is no denying that there is volume of inventory coming (even currently available) but the issue is a lack of quality from a condo/home buyer perspective. Being active in the field, I can say that people want to buy the top 5-10% of what is available and are willing to wait for that better inventory to come onto the market. Those properties are typically the ones going into bidding wars, while others languish on the market and need to drop in price to get sold or turn into rental stock. You can relate that same behaviour to the stock market, in that portfolio managers don’t buy just any stock if they are looking to outperform the market. Add in the emotional aspect and you get the buyer willing to pay a premium (sometimes irrationally) to get what they want.

          More options in all pricing brackets will be good for the market. A return to a balanced market where prices can be negotiated 1 on 1 is healthy. We had a taste of this last summer to December and then B-20 rules compressed a lot of buyers into a narrower price band, putting upward pressure on the sub-$1MM market.

  • Mahud 4 months ago

    Notable difference: Toronto is known for cheap tech labour, Seattle is known for high quality labour. We’re selling that we have cheap labour, partially through a devalued currency to sell labour at a cheaper price, and building people filing cabinets (that take up a large portion of the cheap incomes being paid). What a disaster.

  • Smith 4 months ago

    It will be interesting to see how many of these presale condos owners can get a reasonable mortgage. Nobody can deny that there are a large number of speculators buying up presales. It’s quite speculative to buy a property and rent it out at a monthly loss. Unless the speculator has really deep pockets to absorb a loss at these prices?

    https://betterdwelling.com/city/toronto/a-third-of-toronto-condo-buyers-might-end-up-paying-double-the-sticker-price/

    https://betterdwelling.com/cibc-over-44-of-toronto-condo-investors-dont-get-enough-rent-to-cover-the-mortgage/

  • Bluetheimpala 4 months ago

    Of note…looking at the crane graph…almost all of the those US cities listed are in ‘bubble’ territory and in fact, looking at New York, prices and rents are correcting (which is freaking a lot of people out). Boston, Portland, SF…Seattle is also a bubble but seems to be bucking the trend however still lower than the t-dot.
    How the heck can Toronto, with a bubble that even bubbles are calling bubbles, keep chugging along? Costs are higher but wages are lower.
    As many have noted, building now means sold 1.5-3 years ago when the funny money was laughing all the way to the bank. Will consumers be able to close on their properties in the next 6-18 months? We’ll have to see. Tick tock. BD4L.

  • Beh G. 4 months ago

    I’m lost! Where’s the population growth to absorb this supply?!

    83 Cranes on residential projects, let’s say 300 units per project on average, that’s 24,900 units housing 55,000 people based on the 2.2 people per household. Toronto has a population growth of 22,360 people per year!

    Assuming these projects will be completed in the next 12 months, that means only 40% of the supply will be accounted for by population growth (supporting what BlueStreak said above) and that’s excluding all other housing types currently being built – detached, semis and townhouses – and other projects coming online and being finished in the next 12 months.

    This is inline with data published earlier this year by Urbanation saying 380,000 new condo units were proposed in the GTA in 2017… that would house 836,000 people just in condos and assuming no other housing types are being built (a crazy assumption to make), that’s 15 years of population growth!!!

    That means, even if just half of these projects materialize some of these units won’t sell until well into the next recovery cycle, never mind when they come online! This is of course consistent with what happened in Spain’s real estate crash – 3-4 years into the recovery a sizable portion of those units built before the crash are still on the market.

    • RM 4 months ago

      Bingo. However, population growth is about 50k a year I think. 22k is probably households, which still supports your point. This is something that always bothers me when people spew out immigration stats. First, people often confuse the number of immigrants coming to Canada with the number coming to Toronto, which if I remember correctly is actually decreasing as a portion of total Canadian immigration. Second, people never account for the high probability that people don’t generally immigrate on their own, they bring their families. That leads to the household number, which I’d assume is about half of the total. The last thing that I find hilarious is when bulls cite housing affordability because multiple families or generations often live in the same house… which would actually decrease overall demand. Ridiculous.

  • rx81 4 months ago

    Having followed this page for years now and living outside of Canada for the past few years (partially because of the madness I saw in terms of affordability), I strongly believed that a crash was imminent. However, I came back to Toronto for a visit this week and walked Yonge Dundas square to Union station and saw just how many people there were. I was thinking to myself, that’s why housing is competitive and prices are increasing. I still think housing is overvalued, but it doesn’t seem like a crash may take place..but rather a correction. I don’t have numbers to back it up but the general feel of how many people live in the core and how packed TTC was led me to believe that there has to be high degree of absorption of all this new construction taking place and majority of these people are 25-45 year olds who will have grown up kids moving out and buying their own units over the next 10 -20 years.

    • vnm 4 months ago

      What a load of malarky!

    • Dave 4 months ago

      So you walked down through one of the most touristy areas of the city during the summer peak of tourist season and just assumed that everyone on the street lived downtown?

      Geographically, Toronto is a huge city. It takes more than half an hour to go from the lake to Steeles Avenue on the DVP on a good day and close to an hour to go from east to west without too much traffic. And this is just Toronto and not the rest of the GTA which is twice Toronto’s population and is also seeing a massive build up of housing.

      I will bet that most of the folks you saw are from the outer burbs and out of town (just like you). The city’s population is simply not growing fast enough to justify all the condo development. Nor is the GTA’s for that matter.

      If you check Statistics Canada’s website you will see that Beh G’s number of 22,360 people per year (that’s individuals, not households) is about correct for the last census period published. Real Estate pumpers often forget that immigrants move all over this country, and 30% of all immigrants leave Canada within 5 years to return home or move on to another country. Also, just under 100,000 Canadian born people leave Canada every year. The smaller number from Stats Canada is very realistic.

      • rx81 4 months ago

        I know they don’t all live downtown. But even if 5% of the people that are commuting downtown on those packed TTC subways and streetcars are thinking at some point during their hour long commute that had they lived downtown or closer to it, they’d be home by now. 22,360 may be close to the actual number of people moving in..but you can’t forget the many more that are living in shared accommodation or in rental units, wanting to get their own place eventually.

        Don’t get me wrong, I would love to see a significant correction, it would be my queue to move back to Toronto. As it stands, mortgage payments would be a lifetime commitment, especially with salaries in the IT sector that are not very high. But reality is, as big as Toronto is(as you’ve pointed out), I believe downtown is where a large percentage of people work and many people prefer to live close by or prefer the downtown lifestyle. Those factors will continue driving demand as they have before and that area may not see a large correction.

        Again, I’m not a market analyst or anything, but just going off what I saw this week in the area. Some of it could also be related to Ryerson University which seems to have expanded over the past decade.

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