March came in like a Lamb here at BuzzBuzzHome.
But that was just the start of a much bigger conversation about different aspects of development in Toronto – what buyers want versus what they can get, whether there will be a condo meltdown and even whether the city should say yes to a casino.
Check out the Q&A below:
BuzzBuzzHome: In “The Myth of the Toronto Condo Bubble,” you mention that there’s a lot of fear, and in the pamphlet you refer to people as waiting for this almost-Biblical meltdown. Why do you think that is?
Brad Lamb: I think that the condo market in Toronto is much like the showy cousin that shows up in Cadillac and a bright jacket, sunglasses and a gold watch and seems to be shimmy-shammying and fast-talking. And everyone wants him to fail. And everyone wants that guy to fail because he’s too loud and too successful.
So I think that there’s a sense that it’s the Johnny-come-lately, ‘How dare you be successful? How dare you be so successful that you’re the most successful in the entire world?’ That’s what the Toronto condominium market is.
There’s just something about success and Canadians. Canadians want you to be successful, but not too successful because then they want to take you down a peg.
And the thing is, unlike a house, which a single-family home might take about six months, it can take you three to four to five years from the time you knock down the building that was there, you put in a sales office, you sell it, you get approved, you get your financing and build it. It can be four or five years. And it’s so in your face, every day. And people just don’t like that. They don’t like the constant change. They don’t like uncertainty.
There are a lot of forces in any city that prefer things to be exactly as they were. Let’s live in a Toronto where there are horses and carriages, where we had farms on Avenue Road. The city has to grow up and embrace itself for what it needs to be. And that means we have to have hundreds and thousands of homes in the sky.
BBH: For a bubble to burst, what needs to happen in Toronto?
BL: First of all, there has to be a bubble. And there is no bubble. I lived through a bubble bursting in a much, much smaller Toronto, a Toronto of about 3.8 million people in the late 80s. We horrendously overbuilt our – it wasn’t just our condominium economy – but we overbuilt our condominium economy and we drove prices up significantly higher. There was a tremendous amount of speculation in the marketplace. And then of course the entire economy hit a wall and we had a recession.
And in that recession, we had interest rates that were 14.5 per cent to borrow money to buy a house. The unemployment rate was in the 13 per cent range and inflation running at a rampant number. People stopped buying.
And one of the underlying factors in that era was that there was a phenomenal amount of panic and fear. Where Canadians didn’t really know if they were going to have a job today, tomorrow or the next day – there was a tremendous amount of fear about employment.
There was a huge amount of fear about borrowing money because first of all, it’s hard to borrow money, and borrowing money at 14.5 per cent made any investment ridiculous – you just couldn’t make money on it from the standpoint of buying real estate. And it took such a huge chunk of people’s personal income to be able to afford a home that it caused massive widespread panic.
And that’s what you need for a bubble to burst. You need everybody to panic.
In the current economy, we have unemployment at 7 per cent, we have interest rates at 2.8 per cent to buy a home, we have inflation running below 2 per cent so there’s no fear of people losing spending power. Yes, the economy is growing by 1.5 to 2 per cent but it’s growing by 1.5 to 2 per cent, it’s not sliding minus 3 to 4 per cent.
We’re just kind of in a malaise right now, where the economy is going to grind through slow growth and Canadians are not buying real estate at a frenetic pace.
And I think it’s very easy to see that the likely path of the economy for the next five to ten years is tepid growth and very low interest rates.
And the other part of that is is just the fact that more and more young people they want to live in cities, they don’t want to live in the suburbs so you see in cities like Brantford and Hamilton and Sarnia getting raided. The young people are leaving – they’re not staying. And they’re moving to bigger cities and that’s benefiting cities like Toronto.
BBH: Royal LePage released a poll, cross-Canada, about what different people were looking for in housing. And the Baby Boomers said they don’t want to downgrade to condos and their kids, Generation Y, also said the same where that they want that ideal of a big suburban house.
So what do you think of those desires, in terms of housing, what do you think they mean for the city’s future?
BL: Well – facetiously – I’d like a private airbus 380 and I’d like someone to follow me around all day with a fan and cool me down in the summer, but I can’t afford it.
The reality is, of course, if you ask someone what their ideal home would be, it’s not going to be a 487-square foot box in the sky.
But if you ask people about that, they’ll say well yeah, I’d like to live in a big ranch bungalow with a pickett fence and a dog and the nice yard, but I need a job. And I want a lifestyle. And oh I’m single. So you can’t have all that stuff. It’s a disconnect.
I think that very few people would say it’s their dream to live in a box in the sky. And there’s a lot of people who would say, ‘I’m gonna do it, it’s better than the alternative right now which is renting an apartment or living with my parents or living three hours from work.’
BBH: What about families? There’s a sense that echo boomers are moving into Toronto, into these high rises. But once they start looking into starting a family, do you think there are spaces for them downtown?
BL: Well, yes there are some spaces for them downtown. But are there enough spaces? No. I think that it’s not because developers haven’t asked and tried to deliver that, it’s because that’s not what people wanted.
I think that when there’s evidence that that’s what people want, the developers will do that. But I think that the issue here though is that’s not going to happen because the reality is, the longer people wait to get together and co-habitate, the less likely they’re going to do it.
And there are currently more people living singly than as married couples than ever before in the history of Canada.
BBH: Speaking of the city’s future, this is a bit off topic, but there’s been so much talk about the casino that has been proposed for Toronto. You even mention it in the booklet. RioCan and First Capital Realty have come out against plans. What are your thoughts about the proposed casino?
BL: It’s sucking and blowing, right? If we have a casino, and it’s done right in Toronto, and it’s managed properly – I’m all for a casino at the Exhibition. It’s far enough from the core and close enough to major transportation. And if we can integrate fast transportation to it, I think it’s the right place for it to go.
I think the Exhibition is a major underachievement in Toronto. We need to take that property and we need to really make it a valuable asset to earn money and a casino’s the right way to do it.
We can keep the Exhibition, we can keep the pavilions or add some new ones and I think we could make Toronto a much more fun place to go. We can drive up the number of tourists and the number of conventions that come here. We get an anemic number of tourists to Toronto based on how great this city is. And when people finally do come here, they’re astonished at how great it is.
But you know, if the casino didn’t go ahead, I wouldn’t cry about it.
BBH: I think some of the Liberty Village developers are concerned about it coming so close because they feel like it would change the character of the neighbourhood.
BL: I find that funny because they’ve ruined that neighbourhood – everyone of those developers, except one. The only developer that did a good job was Lanterra at the Toy Factory.
And I like the restoration of the historic properties on the south side of East Liberty. Everything else is absolute crap and should be leveled and started over.
You know, you drive down that street and you feel like you’re in a bad Russian high-rise development in Moscow. It’s so looming and ugly and bereft of architectural integrity. The entire thing is terrible.
I live in that neighbourhood and when I drive into that shopping centre that they built there, I’m embarrassed that that’s downtown. That looks like a shopping centre that belongs in Barrie – not downtown. There’s nothing urban about anything they’ve done there. It’s terrible.
BBH: What do you think the future will look like in Toronto?
BL: Listen, the thing I like about Liberty Village is, I like the fact that that people live downtown and before they didn’t.
I think it’s a massive missed opportunity. And I think that’s what we have to stop. We have to stop these gigantic developments like City Place, like Liberty Village, like all the stuff that’s just north of the tracks south of Queen, between Queen and King. That whole area that’s been redeveloped is appalling as well. And I’ve bought some properties there just because they’re extraordinarily cheap.
What concerns me is that these buildings will last a long time and they are a legacy that we can’t get rid of. We’ve only got so much of Toronto that we can make and what do we want Toronto to be? What do we want Toronto to look like?
And at what point are we so far down the road with bad development that we can’t turn this around. I mean, the first thing you see when you come into Toronto is Liberty Village and City Place. Are we proud of City Place? I think it could have been done a lot better.
BBH: Was there anything else you want to add about the “Myth of the Toronto Condo Bubble” or the city’s future?
BL: Well, I would say the city has a tremendous future. I mean there are a lot of really good developers working here. There are more good developers than bad developers. And most developers that I know and that I’ve talked to and worked with the past – and I include myself in this – actually want to do good work and care about doing good work and err on the side of hiring the better architects, the world-vision type architects.
And just with concern to the Myth of the Condo bubble, we have to stop being concerned as individuals about timing things like real estate markets and stock markets and speculating on gold and things like that. There’s no way in the world that anyone can do that because humans behave irrationally at the best of times.
What we need to do as real estate buyers is to buy real estate for the long-term. Don’t worry about counting your net worth every six months, calling all the agents on all the past sales for how much money you made over the last six months or year.
Buy property, pay the mortgage off and you’re going to get rich in the long-term. Very few people get rich over the short term. And that’s why the stuff with bubbles is bullshit.