Alec Caldwell
Smaller-sized builders feeling the squeeze around the GTA
Canadian Contractor Business Loss Market PropertyIt seems like only the very biggest developers can afford to operate in the subdivision market around the GTA. The smaller builders must join the competition, and bidding wars, in the city's core. The result is a net loss of employment.
It seems smaller builders outside the GTA (Toronto) are feeling the pinch to find affordable properties to buy and develop the last few years.
One reason is government regulations on greenbelts like the Oak Ridges Moraine conservation plan. It’s only the larger entities who can still afford those properties that come on the market. Furthermore, many of these properties will not host working contractors for many years to come: the developers are holding the land, waiting the right moment to turn bigger profits.
The smaller-sized builder can’t afford this approach: he or she needs to survive today. And that means simply: buy, develop immediately and turn a profit, right now.
This situation around the GTA has now forced many of these builders to move their business operations into the Toronto downtown core, putting the squeeze on smaller-sized builders already established there.
Recently, I was told by a reputable source that a property for sale on Douglas Ave, just off Avenue Rd, had 13 bidders, including many builders who were all chasing this same property. The asking price was around $960,000 and because of the fierce competition, it sold for around $1,166,000.
Where they choose to build in Toronto can also become a factor on how quickly these builders canturn a profit. In the Leaside area, for example, with current regulations, it seems the process has gone from around 6 months to about a year to complete a new home. In this area, building permit applications have to include a deposit of $13,130 cash up front!
Now at this stage, some readers might be saying “who cares?” Let me just say, if these same builders were still building their normal 30 house subdivisions around the GTA, that would put food on tables of many subtrades, however, these same builders will now be luckyto build eight new custom residential homes. That a big loss to the employment situation.
Lastly, I’m a big fan of protecting nature with greenbelts, but I’m also a BIG fan of putting bread on people’s tables.
Call me toll free 1-866-366-2930 or email me: alec@carahs.org
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At the Construction Ontario (ICI & Infrastructure) Peter G comments:
Once again Alex, you are bringing insight to the masses in a way that can only benefit the discussion! I am not sure who else however is listening!
One small point however; Did you neglect to mention the double property land transfer tax issue as well facing us smaller guys in the GTA on purpose?
And what of the tight money lending policies from the banks that are NOT in the venture capital game at all and don’t want to be! So despite continued low interest rates, access to financing is not a sure thing and we small guys are forced to continually have ALL OF OUR OWN MONEY – personal and corporate assets at risk all the time!
Factor in the underground economy, the firemen and real estate agent/developers that operate outside of any corporate structure, buying homes in their mothers and wives names and hiring cheap unregistered trades that work routinely in these “in-fill” developed homes that appear to be “fully” renovated but lack significant overhauls to critical elements like foundation water proofing and interior infrastructure (connecting new plumbing to existing old underground and vertical stack systems that are already in excess of 60 – 80 years of age) and reputable quality home builders and renovators can not compete!
Ok, I am waiting for the onslaught of “cry me a river”! But remember, this is MY perspective. Perhaps this is not as much of an issue as I make it out to be.
Hopefully others will pickup and also comment as I would be interested in knowing if their experience is a different one.
Thanks again Alex.