Toronto Under Construction – Episode 61 with Pauline Lierman from Zonda Urban, Anson Kwok from Pinnacle International and Andrew Cotzaoglou from Tribute Communities
This podcast is sponsored by BCGi Baron Consulting Group Executive Search -if you enjoy the show, please support our sponsors: BCGI Website
Meet the guests joining us on episode 61 of the Toronto Under Construction podcast: Pauline Lierman is Zonda Urban’s Vice President Market Research, Ontario and Quebec, principally working to expand the team’s expertise into these key North American markets. Pauline brings more than 20 years experience in market research and advisory roles in the GTHA, providing insight and strategic input based on a deep knowledge of new residential development across the region. She leverages her previous experience in senior market research and advisory positions to maintain the market’s strongest data integrity on the Zonda Urban NHSLive data platform and offer strategic market advice on a full range of consulting assignments. Pauline is often sought as a commentator on the GTHA housing market and is a member of the Urban Land Institute and a former chair of the High-Rise Committee for Bild GTA.
Anson Kwok is Vice-President of Sales and Marketing, Pinnacle International. Former hotelier and graduate of University of Guelph. Also holds an MBA from the University of Toronto- Rotman School of Management. Anson has more than 15 years of Pinnacle experience, and has sold more than 7,000 condominium units across 15 projects in the GTA, he is currently involved in the design, development, planning, and operations of Pinnacle’s more than 10 million sq. ft. of future mixed-use master-planned communities including Canada’s tallest residential building, SkyTower at Pinnacle One Yonge.
Andrew Cotzaoglou brings over 10 years of experience working in the GTA and GGH Lowrise and Highrise housing markets. He leads market research, pricing models, product design, suite mix, and sales strategy. Andrew provides strategic input on all new land and project acquisitions, including quantitative and qualitative market-related intel. In addition, Andrew advises and works directly with the industry’s premier advertising agencies, architects, interior designers, and consultants. Andrew is a panelist on a weekly, television talk show, Hot Property, on channel CP24 with audience impressions of 18 million annually, speaking as an expert on pre-construction homes and the development industry. Prior to joining Tribute Communities, Andrew worked on the front lines of pre-construction sales and marketing for Toronto’s most prominent Builders/Developers, which has built solid professional relationships with the industry’s top brokers.
New Condo Market Predictions for 2024
Ben jumps right into episode 61, stating that the new condo market has averaged about 23,000 new sales per year from 2010 to 2022, but this year will probably end at about 13,000 new sales. A significant decline, says Ben. He asks each guest to share their forecast for 2024, and some of the reasoning behind their decision.
As the numbers person, Pauline answers first saying that her expectation is that it is going to be a slow start, but a refreshing flip to a better fall. Tune in at 4:55 to hear her reasoning. Andrew says he is optimistic, stating that there is a lot of demand, it’s just about the confidence coming back to the marketplace. He thinks we will see movement in the market starting in Q2 and Q3. Tune in at 6:01 to hear his response. Lastly, Anson says that he thinks Q3 and Q4 are definitely going to be a lot stronger. He believes pricing will change across cities and neighbourhoods, with rewards to quality real estate in great locations. Tune in at 6:55 for his reasoning.
Going back to Pauline, Ben asks her to take a peek inside her crystal ball and share how she sees the market evolving over the next couple years. Pauline mentions more projects in the 905 (as opposed to the 416), Hamilton continuing to punch above its weight, as well as agreeing with Ansar that pricing will change across cities, and creative incentives will continue for the next year to 18 months. Tune in at 9:11 to hear her full response. While Ben and Pauline discuss incentives and deposit structures, Ben turns to Ansar asking him what kind of incentives Pinnacle is currently offering on their projects right now.
Interest Rates, Condo Closings & Assignment Sales
Switching gears, Ben cites a recent CBC article entitled “Developer shut Hamilton’s City Centre a year ago for ‘epic’ condos. That plan’s on hold indefinitely” reading that “IN8 Developments said “macroeconomics,” is the biggest factor holding up the project and when the Bank of Canada drops interest rates and mortgages are more affordable, they’ll consider launching”. Ben turns to answer and asks if he has any thoughts on when rates will be cut, and are these higher rates impacting your decision to launch or buy land? This is the crystal ball question, Andrew says at 13:45. Tune in to hear his prediction and outlook on 2024’s spiciest question.
Getting into the nitty gritty, Ben says to Anson, that he heard through the grapevine that there were a few buyers that had trouble closing at One Yonge. He asks him how Pinnacle dealt with these buyers. At 15:53 Anson says he was fortunate that he hasn’t had to take any units back, and that he has been working with purchasers to ensure they close. Pauline jumps in to share her take on what’s happening with closings and assignments, and Ben also asks Andrew to share his policy on assignments and what he’s seeing in his projects. As the discussion continues, Pauline mentions the construction costs and drops some interesting stats and numbers with regards to excavation costs, framing, interior finishes, etc. Tune in at 21:31 to hear her insights, as well as Ansars and Ben thoughts on why the industry has to shift.
Pricing, Supply & Launch Strategies
Ben mentions that for years we’ve heard that the Toronto condo market was going to be oversupplied, from an idiot in a basement apartment in Owen Sound, a loudmouth short seller, American hedge fund analysts, to a Mortgage Brokers with 2-star Yelp ratings. He asks Pauline, will we end up with oversupply? Tune in at 26:06 to hear the group discuss oversupply and what they forecast for this year.
Ben goes back 12 years ago, mentioning that he put together an aggressiveness index, where he compared new condo prices, to resale prices in newly-completed projects, with a focus on an apples-to-apples analysis. For many years, the new condo price premium was 10% to 20%, averaging about 15%, with more for bigger projects with longer closings in downtown Toronto, but lower for smaller outer-suburban projects. During the peak of the market in late 2021 and early 2022, we saw many projects come to market at premiums of 35% to 40%. Ben says he recently looked at projects that launched in 2023, and the average premium was still 24%. He asks Andrew, when pricing a new development, are you giving much consideration to resale values, or are you focusing only on new condo comparables? Tune in at 31:02 to hear Andrew discuss why he is market specific when it comes to pricing a new development, as well as hear insights on pricing from Ansar. Ben also asks Pauline to comment on developers who are cancelling projects and whether she has any insights or numbers into how many projects are actually coming off the market. Tune in at 35:53. The group continues this lengthy discussion while also touching on absorption rates and the many factors that go into a launch strategy, as well as the return of the sales office and working with investors, and possibly pivoting to a rental building as opposed to condominium. At 46:23 the group begin to discuss purpose built rentals, and the conversation naturally flows to amenities. Ben asks Andrew, what are you looking at in terms of amenities in your downtown projects? Tune in at 51:35 to hear Andrew discuss why he gets excited about planning common elements, “it’s the hub of the building,” he says. Ben then asks Ansar if he’s doing anything new in amenities that he hasn’t done before. Listen in at 54:05 why he typically sticks with the tried, tested and true, and why his focus is including great amenities while still keeping maintenance fees stay controlled.
Networking, Relationships & Social Media
Switching gears, Ben moves on to discuss networking and relationships, noting that he’s known all three guests for 10-15 years. Ben asks, how do you approach networking these days, and what advice would you give to someone looking to build a strong network in the industry? Tune in at 1:04:22 for the discussion.
Lastly, Ben wraps up the conversation with a discussion on social media asking the group whether they see the value in social media as a networking or learning tool in the real estate context. Tune in at 1:10:41 to hear our guests’ opinions.
For the rapid fire question and answer period, Ben asks questions like, Should banks get more of the blame for house price bubbles?, Should investors be allowed to list assignments on MLS?, If you had to pick a municipality with the most overpriced new condos, which would you choose?, Should purchasers get a credit on closing when maintenance fees are significantly higher than the marketed figure?, Is there a lot of demand for electric car charging ports at your projects?, Should there be more transparency around closing costs above the contracted sales price?, What upgrades are purchasers getting right now? And more!
Tune in now to episode 61 of the Toronto Under Construction podcast.
Follow Ben On Twitter – https://twitter.com/BullpenConsult
Interested in being a guest on our podcast? Send us an email.