Average condo price toronto . Key cost analysis of the apartment. Construction costs mainly include labor, materials, machinery, and the costs of the general contractor.
The Canadian labor price index is a good indicator of the history and trend of construction costs. Labor prices are rising, and labor costs are, of course, rising accordingly.
It is well known that Canadian labor is expensive, especially for skilled jobs, the hourly cost is still very high.
In terms of construction costs, we can focus on a macro indicator: the production price index PPI. From a historical point of view, PPI has always been an upward line, that is, the price of factors of production has always become more and more expensive for a long time, so the cost of materials and machines is also becoming more and more expensive.
In the Greater Toronto area, for example, the average construction cost of a luxurious renovated Condo apartment with 40 to 60 stories can reach C $460,550 per square foot, and if there are more than 60 floors, the average construction cost per foot will be close to C $600,000 because of the higher building craftsmanship.
To sum up, Daisy Huang Lan boldly estimates that in downtown Toronto, the average total development cost of a high-end project will easily exceed C $900 (and does not include relocation costs, because whether the relocation project makes money and how much it costs are at the developer’s discretion, and the variables are too uncertain). If the land is involved in relocation, the total cost will not be capped.
Of course, the developer is not a charity, the project is to make money, each project has to calculate the annualized connotative rate of return IRR,IRR is the financial concept of project investment and development, I will not repeat it here. Since the development period of a new project is usually about three years, even if the profit margin of the whole project is 20%, the annual connotative rate of return IRR is 6% and 7%. Therefore, developers who are really based on lean development and lean operation can say that there is no exorbitant profit of making a single vote.
These are all based on the iterative cycle of the second-hand housing market and the new housing market, so the uncompleted new housing market is not only a stable regulator of the second-hand housing market, but also a leading indicator of the overall property market.
Buyers begin to look for gold in the second-hand housing market-> demand growth in the second-hand housing market pushes up housing prices-> developers launch new orders based on costs and new market benchmarking prices, smoothly digesting part of the market demand-> uncompleted housing prices go up further. Market response is poor-> developers suspend new listings-> buyers begin to look for gold in the second-hand housing market.
Governments spend a lot of money, and it is an indisputable fact that currencies depreciate. At the same time, Canada’s policy of welcoming new immigrants will not change, so the increase in rigid demand for real estate brought about by population growth is guaranteed by long-term fundamentals.
In this context, with the decrease of land supply in downtown Toronto, the increase of demolition costs, and the increase of construction costs, the development cost of downtown Condo is also rising.
As investors, they should know where they are in the market cycle node, and hunt opportunities between second-hand housing and new uncompleted housing in order to be able to do well in the market, outperform inflation and outperform the market.