There are a few problems with this, and most don't have to do with "greedy" builders.
The cost of land itself. Any land that could have a condo built on it in a central location is expensive. Even once you've obtained the land, you have to go through a very expensive process with the city to get the zoning and density needed to build a condo. That process needs serious refining in Ottawa, when compared to the same process in Toronto, it's substantially more expensive - those costs get passed on to the condo purchaser through higher prices.
Next up is the lending practices of banks. Most builders have to work with a bank (or some type of lender) to get the adequate funds to build the project. But that loan doesn't cover the costs of hiring architects, building a sales office, paying for marketing materials (sales kits, radio ads, etc...) and the approval process itself. So it is possible (and has happened) that a builder forks out literally millions of dollars only to find out they can't get the zoning they need and the project never moves forward. Then the only play for the builder (unless they have deep pockets) is to sit on the land, let it increase in value and sell it off in hopes to re-coop the costs of the project that was never released. (please see Acquarello (sp??) as an example)
Now even if a builder creates the marketing, gets the zoning, opens their sales office and has their sales team start selling, they may never get the loan from their bank. With the tighter lending practices of the banks, builders now need over 70% (sometimes closer to 80%) pre-sales before the bank will lend the money - this threshold used to be 60-65% (please see Rhombus and Icon for examples).
And then comes Tarion into the equation. Tarion used to only require the developpers to come up with one date - as estimate time of completion. If that date was going to be late, the developer was allowed to push it back so long as they gave the purchasers 90 days notice. This completion date could be pushed back indefinitely without penalty as long as the 90 days notice was given. Obviously this created problems for the purchasers, they were depending on their new home being ready on X date, but that date became Y,Z, A, etc... and it was a real detriment to people looking to buy a newly constructed home. So Tarion steps in and changes the occupancy rules and adds an outside date - the latest date purchasers could take occupancy without penalty. If the occupancy date had to be pushed beyond the outside date, the purchaser than had the power to decide to move forward with the new closing date, or cancel the deal and get their money back. (please see 111 West for example) Now this new Tarion rule is fair for purchasers (and as a purchaser of a few condos myself, I have to admit I very much enjoy these new rules) but it's hardly fair for the developer. Developers can't start actually selling until they are registered with Tarion, at that time they are given the Tarion document which includes their estimated delivery date and outside date, and the clock starts ticking. So they have usually 2 years to sell, build and move people in before the outside date - in new construction delays are abundant and almost unavoidable, so it's rare that the estimated completion date will be met and far more likely the actual move in date will be the outside date. So developers risk potentially building 80% of their project, experiencing a delay (could be as simple as a shipment of supplies being late) and that could re-open all of the purchasers legal contracts and they can all run ship, leaving the Vendor with an almost completed project with no to little sales.
I know this is a long winded answer to your question, but as the price of land goes up and the banks get tighter and tighter, the cost of condos will not be dropping any time soon.
Quote:
Originally Posted by OTSkyline
Sad... Could the whole Little Italy plan be shelved? 
Also, I find it stupid that people say there is a "cooling" of the condo market. Prices are getting ridiculously out of hand, how about just lowering prices, then you'll have lots of sales. Everyone I know who are university graduates with good/ok paying jobs can't afford to buy houses or condos therefore EVERYONE is still renting...
I, for once, would love to buy a condo but it's not do-able but I can't afford it At $250,000 for a tiny 1 bedroom (not including taxes, condo fees, hydro & heating etc..). Why not build and launch condo towers with prices like these:
1 bed: 150,000
2 bed: 200,000
3 bed: 275,000 ?
-Probably because of greedy developpers... |
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Design over functionality.....my god some units have 2, 3, 4 or even 8 (Penthouse) balconies...and they do not connect.
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