It’s no secret that Canada has an issue with housing supply. Housing stock has remained critically low across the country for years, and what new homes are built have often been purchased soon after reaching the market. Our country is growing rapidly, and experts like the CMHC have indicated we will need to build almost 6 million new homes in the next 10 years to meet our growing needs.
To the casual observer the problem is easy to solve: just build more homes. For those in the real estate development field, the problem is much more complicated than this.
“There are really several reasons why the supply and demand imbalance has become so persistent,” said Jason Roque, CEO of Equiton. Through his career, Roque has become deeply familiar with what goes on behind the scenes in bringing development to market. Beyond the thousands of residential units that Equiton manages, they are also actively working on new development projects to bring to residents and investors. Like most important work, this task is rarely easy.
“First of all, a lot of locations have just a really limited amount of land available for development,” explained Roque. “This can be limited through things like the greenbelt legislation but also due to difficulties when developers try to rezone or redevelop an existing area within the urban boundary.”
“Another challenge is simply the time it takes to get developments to market and the costs associated with developing property today. We may look at a number of projects that seem good in principle, but upon closer analysis of costs associated with bringing a project to market, the numbers just don't make sense. So while there oftentimes seems to be a lot of projects that could be done, it's just that they're not economical.”
Despite what may seem like a slow process, the development industry wants new homes on the market as much as anyone else. In general, new homes are good for business, good for people, and good for cities. There are many steps that a developer must follow to successfully bring a project to market and, if not managed effectively, can slow things down. The challenge then for these large players is to develop systems that make this process efficient by anticipating and managing any potential roadblocks.
“From the start, it’s about making sure you're getting involved in projects that you're very confident can be developed within the timelines and budgets you’ve set,” said Roque, shining a light on Equiton’s approach to new developments.” Once you’ve done that you just have to be very diligent every day making sure that you're continuously moving that project forward. With experience, you learn what kind of roadblocks and bottlenecks you may experience through the development process, and then it’s about making sure you address those early on so you can get the project done on schedule.”
Equiton’s new developments have primarily focused on higher density projects such as mid and high-rise apartment complexes. Roque emphasizes that while all kinds of development projects are needed today, it is these kinds of projects that represent a best-case scenario for supply and demand factors, as well as project feasibility. Supporters of increased development agree that high-density projects will be crucial to hitting our home development targets in Canada.
“One thing about mid or high-rise versus low-rise communities is that they're generally more supported by a lot of the municipalities. The nice thing about the mid and high-rise segment is that you're able to add more density, more homes, in an area that already has existing infrastructure. You're able to deliver something that improves the quality of the community.”
Looking at Equiton’s own current Sandstones development in Toronto, we can see how these sorts of choices actually come into play over the course of developing a new property. All aspects of supply, demand, approvals, as well as resident lifestyle needs, must fall into place for such a development to be successful.
“What really attracted us to this project was primarily an excellent location. It's close to the Scarborough Bluffs and not far from downtown, so it's one of those locations where the buyers ultimately are going to have access to a great lifestyle within the city of Toronto, but at the same time not necessarily have to worry about the hustle and bustle of being directly downtown. With interest rates and inflation going up today, that lower price point will also drive demand. On the other side of things, it’s a really efficient site, in an area where the city is supportive of the redevelopment so it kind of just checks all the boxes.”
Though our supply issues in Canada may seem frustrating to some, in reality, it presents a great opportunity for a group like Equiton and its investors. It’s clear that until our need for housing supply is met, real estate will continue to be in high demand. The added benefit of new developments is an added level of control that helps developers to extract the most value from their projects. The result is a high-quality product with a great price and great promise.
“I don't see the supply-demand imbalance going away anytime soon. People talk about it lasting a decade, but in reality, this is a problem that could take a generation to fix. So as an investor, you have a favourable, long-term horizon with respect to these types of things. From an investment perspective, typically development projects are going to be more profitable than buying existing buildings.”
While investing in new developments may not be feasible for individual investors, thanks to groups like Equiton, investors can share in the opportunities that these new projects provide. Visit Equiton to learn more about their upcoming development projects and how you can invest.
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