Maintaining resilience in a roller coaster real estate market
How one builder ensures properties remain good investments as the housing market stabilizes.
Home is many things: a place to create memories, a reflection of identity, a sanctuary from the world and for most people, the biggest investment of their lives.
Earlier this summer, The Economist Intelligence Unit’s 2022 Global Liveability Index ranked Toronto in the top 10 most liveable cities in the world. But an investment in a home in the Greater Toronto Area (GTA) now involves careful risk assessment. The Canadian Real Estate Association’s recent monthly reports show activity returning to pre-pandemic levels as the housing market corrects itself following two frenetic years of record-setting sales prices and volumes.
City developers are experts in risk. Millions of dollars are at stake with every project, even in a robust economy. Sam Mizrahi, president and founder of Mizrahi Developments, takes pride in honing his expertise. He is currently building The One, Canada’s first $1.5 billion tower at the corner of Yonge and Bloor. When he shifted from constructing single-family dwellings to building boutique luxury midrises in Toronto’s Yorkville neighbourhood in 2011, uncertainty clouded the economy in the aftermath of the 2008 financial crisis. But he carefully studied the market and went ahead. All the units in those projects, 133 Hazelton and 181 Davenport, were sold before construction began.
His years of experience in Toronto, along with the insights of real estate professionals who have weathered this city’s ups and downs, yield wisdom about how to best market-proof your real estate investment, no matter what the market brings.
Remember location is an emotion
Mizrahi understood that Yorkville was a desirable location, but he also says it’s critical for buyers to understand why people get emotionally invested in their communities.
“The purchase of a home is always emotionally driven,” says Mizrahi. “My approach has always been to identify neighbourhoods that are mature and popular, then listen to the local community. In this way, we start to understand the underlying emotions of why a place is favoured as well as learn how we can add value to an area not just for potential homebuyers but also for the people who already live there.”
By adding value to the community, a builder can help ensure the resilience of its properties in those neighbourhoods. That can be seen in Mizrahi’s The One, an iconic superstructure designed by Foster + Partners that will be the tallest building in Canada with ample amenities for residents and visitors alike.
Identify scarcity in the market
The pandemic has created a pent-up demand for a downtown social life, with access to culture, cinema, restaurants and entertainment. Proximity to public transport is highly valued as a result, says Paul Maranger, broker and senior vice president of Sotheby’s International Realty in Toronto, but there’s limited land on the subway lines. “The city is confined by the lake to the south and there’s a mindset that the northern edge is the 401,” he says. The increase of density around TTC stops is a reflection of that demand, which also helps explain the consistent value of The One, located at the epicentre of midtown with underground access to the nexus of north-south, east-west subway routes.
Space is clearly at a premium along the spine of the TTC. The number of residences in The One is only 416—a tribute to Toronto but also a decision to maximize a sense of peacefulness with a smaller population in the tower. By comparison, other downtown high-rises of a similar height offer as many as 2,000 units.
Invest in the top tier of a category to avoid buyer’s remorse
Home buyers comparison shop, whether they are actively shopping or just keeping an eye on the market. Even if they fall in love with a home immediately, they still tend to look at other options to ensure that their emotional response makes practical sense as well. It’s an easier decision if there are few similar options for them to compare against.
A proven strategy for owning a solid investment property is to make sure it doesn’t pale by comparison. That is, it’s not the same or worse than most other comparable homes. Sellers with listings in the top 10 per cent of their category will always attract buyers. “It’s mediocrity in the mass market that languishes,” says Maranger.
That speaks to why residences at The One have not experienced a price drop, and are now more than 80 per cent sold. “There is nothing to compare them to,” explains Katy Torabi, a realtor with Royal Lepage. “These residences are in a category of their own.”