Family-sized condo units in Toronto have shrunk in the last 12 months, and according to one developer the reason is because of the mortgage stress test.
“Room count begins to really control the end price,” said Plaza Corp.’s Senior Vice President Scott McLellan. “But the size is not where it was two years ago because the stress test has made us come up with smaller product to make it more affordable, and if we didn’t do that there simply wouldn’t be buyers for that product.”
Family-sized units have at least two bedrooms and are usually accompanied by a den, and up until last January were built over 1,000 square feet. However, it isn’t uncommon in newer builds to find units up to three bedrooms large crammed into 850 square feet.
Cognizant that younger couples are a significant cohort in the buying market, McLellan says that developers and architects work diligently to come up with units for families priced around $700,000 with between 800 and 850 square feet.
“Your living space will get smaller but it will help with the affordability factor,” he said. “The mortgage stress test now makes it much more difficult for younger couples once you get into that two- and three-bedroom unit over $850,000. A thousand square feet around Midtown Toronto is somewhat out of reach for young couples, so the trick for developers is to have the same room counts with small units so that you have a more affordable end price.”
That could all change in a heartbeat. Development charges are slated for manifold increases that will invariably be transferred onto the cost of the units and paid for by purchasers. McLellan believes it will drive affordability “down the drain,” especially for younger couples looking to have children.
However, there’s no doubt that families have abandoned the suburbs for the bright lights of the city. While cost increases might yet reverse the trend, Sam Crignano, president of Cityzen Development Group, says that most of Toronto’s condo units are small because of investor demand, although that’s changing.
“Case and point, my children,” said Crignano. “My eldest lived in a one-bedroom unit and now she lives in two-bedroom-plus-den because she has one child and is planning on having one or two more, and that’s why she bought a bigger unit.”
Crignano also doesn’t think the trend of families living downtown will wane anytime soon.
“You buy a neighbourhood first,” he said. “What drives you to a neighbourhood? It could be work, friends, family, amenities like parks, churches, shopping, recreational activities. There are all sorts of reasons why people prefer living in a city like Toronto.”