February 1, 2012
By Ben Myers
There has been much discussion lately about three-bedroom suites and whether municipalities should require developers to include this unit type in their new condominium projects. Trinity-Spadina ward councillor Adam Vaughan has been pushing builders in the downtown-west area to include three-bedroom suites at their highrise projects (accounting for 10 per cent of units) and the City of Toronto is considering a policy that would require a similar quota for all new downtown condos.
The contention is that the downtown area is too transient, young condo dwellers flee to the outer city and suburbs when they have children, and that larger units would entice them to stay, creating a greater sense of community and friendship that occurs with long-term residents.
Developers in Toronto and the 905 areas have done a great job of creating vertical communities where residents feel they belong and want to stay long term, but they design their suites based on market demand. In many new condominium projects, the three-bedroom units are the last to sell and are often bought by affluent empty-nesters looking for more space and investors looking to rent by the room. Of the 13,000 new condominium suites that were launched in the first half of 2011, just 1.2 per cent were of the three-bedroom variety, according to data from Urbanation’s Condominium Market Survey on the Toronto Census Metropolitan Area (CMA).
In Q2-2011, just 3.8 per cent of the 4,637 resale condominium units that traded in the CMA had three bedrooms; these suites sold for the lowest per cent of list price among unit types, took the longest to sell in terms of days on market, and had an average monthly condo fee of $827. Data from UrbanRental shows that investors have not bought three-bedroom units either, as less than two per cent of CMA condominium apartment rentals in Q2-2011 were three-bedroom suites.
Families appear to have spoken with their wallets, as the data above demonstrates. The average unsold unit in Q2-2011 was being offered for $620 per sq. ft. in the downtown-west area, so a 1,000-sq.-ft. unit would cost $620,000. Developers have attempted to reduce that lofty end-selling price by offering three-bedroom suites as low as 750 sq. ft. (bringing the price down to $465,000), however families are still choosing longer commutes and dated interiors outside of downtown in exchange for larger houses, basements and small yards.
There is no simple solution to this dilemma, but as commute times increase and low-rise housing costs escalate, demand for three-bedroom units downtown will materialize, and developers will recognize the need and design their projects accordingly. Suburban municipalities do not require low-rise developers to build a certain percentage of small townhouses in each community to cater to single people, so should the City of Toronto require three-bedroom units for families?
Source: Ben Myers is the editor and Executive Vice-President of Urbanation, a market research firm that has been tracking the new, resale and future condominium market since 1981.
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