Somehow, a high-rise condominium unit of approximately 300 square feet in downtown Toronto or Vancouver with en-suite laundry and a galley kitchen in a building with amenities, is now considered inhumane in this country.
There are a variety of market and government factors that have led to micro-condos, but let’s start by addressing the fact that if you live alone
in a small bachelor apartment with a party room and exercise facilities, you are a far cry from homeless.
That said, smaller
that were built at a rapid clip as the country’s real estate boom stretched well into the pandemic have lost much of their allure in recent months.
Investors are increasingly turned off by a market where capital returns seem unlikely and positive cash flow has become elusive based on
today.
Would-be first-time buyers are balking at current prices and interest rates, especially as rents come down. And f
amilies were never interested in the first place.
Even those who did pull the trigger on a small unit in new builds — usually the first units to sell — have been reluctant or unable to close, said
G
reg Zayadi, president of Rennie & Associates Realty Ltd.
“They are probably defaulting on the smaller stuff because you have a lower deposit at risk. It’s an easier one to walk away from,”
he said.
Just to be clear, you cannot literally “walk away” from your contract to pay for a condo. However, in many cases, developers don’t bother to come after those people because the deposit covers the “at-risk” money or the drop in value.
Zayadi said the bulk of unsold inventory in Vancouver,
which hit 12,354 units in the third quarter, up 16 per cent from the previous quarter,
was priced between $950 and $1,200 per square foot at the peak and is now moving towards about 20 per cent below that range.
“To absorb that inventory, we are seeing a pullback,” he said.
With end-users being the only buyers, units will have to get larger and prices will have to come down for the next set of proposed condos.
“A lot of aspects of the industry are in paralysis, and they don’t even know what to think or do,” said Zayadi, who believes it will take two years to work through Vancouver’s inventory. “We cannot deliver a product now that anyone is willing to accept.”
Forget the idea of combining two 400 square foot units into larger facilities: That’s not happening due to technical issues, such as plumbing and electricity problems — and the sheer cost.
Brad Burns, a senior associate and design director at architectural firm Gensler, said some smaller units can work and have worked in situations for student housing.
His firm is designing projects in Vancouver for a single person, at the behest of universities dealing with soaring housing costs.
“They are designed as efficiently as possible because the
has become an extreme limiting factor for students,” said Burns, adding that this has meant living with parents or driving long distances. “These are nano or micro units.”
They come with amenities and are fully furnished, but they are super small — a
s small as about 160 square feet for the tiniest nano unit.
But that still means a full bath, cooking area and desk space.
“It’s tight,” said Burns, noting this type of housing is only marketed to students. “It’s different because they have everything provided for them as students. They can check out things like vacuums. It’s just highly supportive. They won’t even lease the space to someone who is not a student.”
Harley Nakelsky, president and partner at Baker Real Estate, rejects some of the negative language surrounding smaller Toronto units, which typically check in at around 400 square feet.
“I actually think there is a massive need for them, and it is where people live and where they can afford to live. I lived in one,” he said, pointing out that most of the unsold units currently are larger ones with higher price tags.
The bigger question is whether we’ll stop building these smaller units, and he maintains there’s no way.
“We do sell the majority of (smaller) units to investors because it is hard for a younger person to know where they will be in five years,” said Nakelsky. “Once you get people needing to live somewhere, the smaller units sell faster, rent faster and we still see higher prices per square foot and higher rental per square foot.”
The executive rejects the notion that “no one can live” in those units, yet acknowledges they are likely best suited for one person.
Without question, it is not ideal. I’m not sure that my wife would agree to share that unit with me. Or whether our marriage would survive.
And you get no argument from me that even at $1,000 per square, with 20 per cent down, a $320,000 mortgage for a unit with no true bedroom is not a dream. My first mortgage was lower than that for a detached house in the 1990s.
But there is nothing subhuman about that space. People around the globe live with less. People in Toronto and Vancouver, too.
It’s going to take prices to drop even lower, and government fees and taxes to decline even more, for units to increase in size substantially.
Even then, the micro-condo is likely here to stay, in one form or another.
• Email: gmarr@postmedia.com
