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Baby, we got a bubble!?
- Thread starter simuls
- Start date
metroTO
Active Member
I think Brad Lamb has made plenty of money these past few years for him to take a little break from developing. He's still collecting some good commercial rent from the properties he's sitting on. There's a lot of inventory out there and more to come so his realty business should keep him busy still.
Lamb's more of a boutique developer that has carved a niche in the market. I don't think you can compare his projects with the likes of Tridel, Great Gulf, Plazacorp, Lifetime, etc.
This construction boom has seen a lot of cowboy or newbie developers trying to strike it big on the condo craze. I'm sure most of them will be one-hit wonders when it's all said and done.
interested
Senior Member
I agree I think Lamb will survive and play again another day. I think he is very savy; partnered with other developers, has made significant amount of money the past few years and will continue to have revenue flow in while he waits, both from properties he has and from his real estate revenue. He is also building outside of Toronto in Ottawa and I believe Calgary.
In my view, there will be a few small projects that go ahead and the very big developers with deep pockets will build a limited number of buildings.
After all, if no one is building, costs come down (both labour and materials) and hence prices for new construction can come down somewhat and still produce a healthy profit. I don't think we will see much in the 200 condo units range product as this will not appeal in general to investors. We may see a few high profile 40-60 story projects (aimed at first time/downsizing buyers and investors....not all investors share the view after all that there is no money to be made) and 20-30 units appealing to mainly end users.
Then, given the lead time to building, there will probably be a shortage in 5-6 years with developers scrambling to get projects to market in another 2-3 years so they can meet the shortage. Just my guess as to how this will unfold...assuming no major World black swan event in which case it is anyone's guess.
In my view, there will be a few small projects that go ahead and the very big developers with deep pockets will build a limited number of buildings.
After all, if no one is building, costs come down (both labour and materials) and hence prices for new construction can come down somewhat and still produce a healthy profit. I don't think we will see much in the 200 condo units range product as this will not appeal in general to investors. We may see a few high profile 40-60 story projects (aimed at first time/downsizing buyers and investors....not all investors share the view after all that there is no money to be made) and 20-30 units appealing to mainly end users.
Then, given the lead time to building, there will probably be a shortage in 5-6 years with developers scrambling to get projects to market in another 2-3 years so they can meet the shortage. Just my guess as to how this will unfold...assuming no major World black swan event in which case it is anyone's guess.
CN Tower
Banned
While both are significant I submit that Lamb's ego far surpasses his intelligence. And with enormous ego comes enormous and often false confidence leading to a belief that one is infallible. My guess is that he loaded up on high priced development lands yielding well below his cost of capital to develop. So while I see no lower income housing for him or heaven forbid a temporary residence in one of his own projects, I see great misfortune for this tall man coming from the great condo pause that is unfolding here.
cdr108
Senior Member
i don't think he has the cash (or credit) to develop any more projects.
AFAIK, he has under construction king east, flat iron lofts, King charlotte, theatre park, riverside towns, and gotham (in ottawa).
he also has under pre-con brant park in toronto, soba in ottawa, and 6th & tenth in calgary.
anyone reading the King East thread in the r/e section will see how poorly that is being handled with delay after delay, and lack of communication from the builder (ie. Lamb) is compounding the disappointments and anxiety of buyers there.
cdr108
Senior Member
OMG, where do i put the smallest 1 bedroom floorplan i've seen !!!
373 sq ft >>> YES, you read it right >>> 373 SQ FT !?!?
that was called a bachelor a few years ago. developers really have no shame !
http://sobaottawa.com/pdf/SOBA_906.pdf
373 sq ft >>> YES, you read it right >>> 373 SQ FT !?!?
that was called a bachelor a few years ago. developers really have no shame !
http://sobaottawa.com/pdf/SOBA_906.pdf
marsh
Active Member
found this article on line Huffington Post Canada - Housing Market: Toronto Condo Analysis Uncovers Spectre Of Irresponsible Lending
The Huffington Post Canada | By Daniel Tencer Posted: 11/06/2012 7:51 am EST Updated: 11/06/2012 9:34 am EST
reddit stumble
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A report from an equity research firm into the Toronto condo market raises serious questions about the possibility of irresponsible mortgage lending, and suggests that, with the market turning down, some investors could be risking their retirement nest-eggs by buying condos.
In an effort to determine what’s behind the big run-up in condo prices in Toronto in recent years, market analysis firm Veritas sent “mystery shoppers” to two unnamed Toronto condo projects still under construction.
To their surprise, the researchers found that “no mortgage pre-approval was needed to buy a unit. … Only a valid driver’s licence was required to purchase a unit, along with a down payment cheque.”
The report, obtained by The Huffington Post Canada, also noted: “At one sales centre, BMO was willing to lend half of the required 20 per cent down payment. Apparently, BMO is qualifying the prospective borrower on the full mortgage before approving the down-payment loan.”
The report said this was “indicative that the industry is bending over backwards to make it easy to take the plunge and buy.”
Veritas also noted that, at both condo projects, “sales staff stretched the truth (mightily).”A salesman at one condo project tried to oversell the health of the city’s housing market by claiming that 70 per cent of Canada’s immigrants settle in Toronto. (The number is closer to 30 per cent.) At the other condo project, a saleswoman overestimated by 20 to 40 per cent how much condos in the area are renting for.
The report notes that not pre-approving buyers for mortgages at these condos may not be as risky for the developer or the bank as it sounds, because one of those condo buildings has already sold the 70 per cent or so of units needed to secure financing for the project, and the project is likely on stable footing. Sales staff at the other building said “financing is being provided by pension funds,” according to the report.
The study also found that buying a condo in current market conditions may be a bad investment.
Comparing rental and purchase prices at 64 Toronto condo buildings and 24 Vancouver buildings, the study determined that “investor owners are accepting returns well below, say, bank dividend yields, despite the illiquidity and operational risks of being a landlord.”
The report notes that some people who have bought condos as an investment have borrowed money against their existing homes to fund the purchase — a move the report says could be unwise.
“With condo prices inherently more volatile than house prices, and a demand/supply imbalance in the works, we believe the retirement nest egg of many condo investors is at risk,” the report states.
While the study raises the spectre of a U.S.-style housing crash coming to Canada, fuelled by easy lending and irrational optimism about future house prices, other market observers say this is an unlikely scenario.
CIBC chief economist Benjamin Tal last week issued a report saying that Canada will be able to avoid a U.S.-style meltdown because many of the factors involved in the U.S. crash don’t exist in Canada.
Tal pointed out that the use of adjustable-rate mortgages (ARMs) that offered very low introductory interest rates and then jacked up rates several years into the mortgage helped sink many U.S. homeowners.
He said the U.S. market was pushed down by homeowners who had little or no equity in their homes, making them particularly vulnerable when prices fell.
The CIBC economist concluded that, while Canada’s housing market is headed for a downturn, it won’t be on the scale seen in the U.S.
But the Veritas report would suggest that there may be more Canadians with no equity in their homes than previously thought.
Overall home sales in Canada were down 15.1 per cent, year over year, in September. Prices are still rising nationwide, but Vancouver is seeing price declines and Toronto’s house prices appear to be flattening.
The Huffington Post Canada | By Daniel Tencer Posted: 11/06/2012 7:51 am EST Updated: 11/06/2012 9:34 am EST
reddit stumble
33
25
A report from an equity research firm into the Toronto condo market raises serious questions about the possibility of irresponsible mortgage lending, and suggests that, with the market turning down, some investors could be risking their retirement nest-eggs by buying condos.
In an effort to determine what’s behind the big run-up in condo prices in Toronto in recent years, market analysis firm Veritas sent “mystery shoppers” to two unnamed Toronto condo projects still under construction.
To their surprise, the researchers found that “no mortgage pre-approval was needed to buy a unit. … Only a valid driver’s licence was required to purchase a unit, along with a down payment cheque.”
The report, obtained by The Huffington Post Canada, also noted: “At one sales centre, BMO was willing to lend half of the required 20 per cent down payment. Apparently, BMO is qualifying the prospective borrower on the full mortgage before approving the down-payment loan.”
The report said this was “indicative that the industry is bending over backwards to make it easy to take the plunge and buy.”
Veritas also noted that, at both condo projects, “sales staff stretched the truth (mightily).”A salesman at one condo project tried to oversell the health of the city’s housing market by claiming that 70 per cent of Canada’s immigrants settle in Toronto. (The number is closer to 30 per cent.) At the other condo project, a saleswoman overestimated by 20 to 40 per cent how much condos in the area are renting for.
The report notes that not pre-approving buyers for mortgages at these condos may not be as risky for the developer or the bank as it sounds, because one of those condo buildings has already sold the 70 per cent or so of units needed to secure financing for the project, and the project is likely on stable footing. Sales staff at the other building said “financing is being provided by pension funds,” according to the report.
The study also found that buying a condo in current market conditions may be a bad investment.
Comparing rental and purchase prices at 64 Toronto condo buildings and 24 Vancouver buildings, the study determined that “investor owners are accepting returns well below, say, bank dividend yields, despite the illiquidity and operational risks of being a landlord.”
The report notes that some people who have bought condos as an investment have borrowed money against their existing homes to fund the purchase — a move the report says could be unwise.
“With condo prices inherently more volatile than house prices, and a demand/supply imbalance in the works, we believe the retirement nest egg of many condo investors is at risk,” the report states.
While the study raises the spectre of a U.S.-style housing crash coming to Canada, fuelled by easy lending and irrational optimism about future house prices, other market observers say this is an unlikely scenario.
CIBC chief economist Benjamin Tal last week issued a report saying that Canada will be able to avoid a U.S.-style meltdown because many of the factors involved in the U.S. crash don’t exist in Canada.
Tal pointed out that the use of adjustable-rate mortgages (ARMs) that offered very low introductory interest rates and then jacked up rates several years into the mortgage helped sink many U.S. homeowners.
He said the U.S. market was pushed down by homeowners who had little or no equity in their homes, making them particularly vulnerable when prices fell.
The CIBC economist concluded that, while Canada’s housing market is headed for a downturn, it won’t be on the scale seen in the U.S.
But the Veritas report would suggest that there may be more Canadians with no equity in their homes than previously thought.
Overall home sales in Canada were down 15.1 per cent, year over year, in September. Prices are still rising nationwide, but Vancouver is seeing price declines and Toronto’s house prices appear to be flattening.
interested
Senior Member
With regard to "stretching the truth" sales people always do that. There are always and will continue to be "investors" who make decisions with little or no research. Unfortunately the expression: A fool and his money are quickly parted" comes to mind. Making a big investment decision one would hope people would research it and confirm the data being told. I remember looking at an investment decision, looking at rents, and then lowering them by 20% to ensure that I could carry in this scenario but I am not sure others do the same. "Buyer beware."
Those undercapitalized investors will be the ones who make investment opportunities for others who do their homework.
One perhaps falsehood or incorrect thesis of the report is that landlords are accepting rents below what they could get on a stock investment. Perhaps there are people out there who are looking at bond / fixed investments and income production who despite the headaches and lower revenue prefer brick and mortar that they can see. Stocks do disappear and fall in value....dividends do get suspended etc. Older individuals who have been burnt in the stock market (the Depression, Black Monday in 1987, 2000 Tech Crash, 2008 Great Financial Recession) are looking for more security. I am not saying that R/E is a good investment, especially at the current level of PRECON, but if reasonably capitalized it may form an alternate investment or part of a diversified portfolio.
I would hope there are not a lot of people who have the "no equity" situation in their home and if lending was truly done in that fashion I sincerely hope that those individuals are dealt with not only in a civil but a criminal manner for blatent disregard of any fiduciary duty to the client or their employer or CMHC or equivalent.
interested
Senior Member
He certainly is building a fair number of projects (along with other partners remember however). The projects under construction referred to presumably have been 70% sold minimum already and he has 20-25% downpayments. Unless his construction costs have ballooned, his financing should be in place and remember at current pricing ($500+/sq.ft. and in many cases much higher ) I assume developers are making a lot of profit so even if they had to sell out at lower prices some of the profit may disappear but they will not be under water in all likelihood.
I have not been reading the King East thread but certainly complaints about builders and delays I believe is almost the norm. Every Precon I have bought has been 1 year or more beyond the time line usually initially marketed. Perhaps the King East is worse than others...I have no idea. Most builders don't communicate well...I find it surprising however that Lamb would do this. I say this since he is a realtor as well (a very knowledgeable one at that) I would think he would be aware of how a bit of communication can help.
Finally, you may be right that he wants to see a few of the projects completed and sold out so he can put away his profits so he has the were with all to build more.
All of the above said, I have no idea of what Lamb's actual financial position is but I would hope he is sensible. Everyone got a wake up call in 2008-2009 and one would hope that he ensured his own financial stability on each/every project.
neubilder
Banned
The Kingeast is being construction managed by 5Nine, and they are the ones who have repeatedly insisted that they could maintain absurdly optimistic timelines, both to buyers and apparently to LambDevCorp as well. I'm not sure why they were compelled to do this - perhaps penalties or risk of being fired. I had a frank conversation with someone at 5Nine 9 months ago and they were still insisting on a July occupancy. I told them it was impossible. It does seem strange that Lamb would allow himself to be led down the garden path - a quick assessment on his part of the timelines of several of his own or of Freed's projects of a similar scale should have been enough evidence to prove that 5Nine was out to lunch. And why there hasn't been better damage control on Lamb's part is also a mystery to me.
neubilder
Banned
Dare you to say that out in the open and to his face.
UserNameToronto
Active Member
I'm reading this thread from my rented apartment (not in Toronto, not in Canada). It's 390 square feet, shabbily finished, and worth about C$528,000 at current exchange rates. Nothing shameful about the market, it's just supply and demand.
rbt
Senior Member
And located in Ottawa, not Toronto, nowhere near downtown (as far as lobbiests are concerned) surrounded by relatively low-priced houses. The highway makes for a lousy view too.
At first I assummed it was in the business district with the intended purchaser being a lobbiest who currently lives out of the Sheraton (there are a ton) but it's too far from parliament for that.
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neubilder
Banned
avenirv
New Member
In London, UK around British Museum (a quite decent area) there are entire blocks with buildings hosting 19 square meters apartments (1 room with kitchinette included, a full bathroom with shower), fully furnished (they have specially designed furniture) for 2 persons. They rent for 1100 pounds/months and it is difficult to find an available one. They are a very good investment.
Similar conditions you can find in Manhattan.
Location, location, location...
Similar conditions you can find in Manhattan.
Location, location, location...