Waterloo Region is building more up than out

The 2021 census data was released last week, and high-rises in Waterloo Region are the popular choice over detached homes.

It's evident the region is building up more than out, and a real estate expert indicates builders want to maximize the yield on the land by creating higher density.

“With land selling as high as 18 to 20 thousand per foot, it's impossible to build detached homes at an affordable price. The affordability only comes in on the mid-rise and high-rise type properties,” said Faisal Susiwala, Broker of Record, ReMax Twin City.

He adds that they are also finding builders are taking advantage of the fact there is a “massive investor speculation population” coming into our region.

“High-rises are being marketed to investors more than to the unit users. So, it's not affordable anymore because the prices builders can get from investors are future values.”

Pre-pandemic, people could buy a pre-construction at the same price as a re-sale unit would be selling for in the market today. However, according to Susiwala, today's builders and developers have realized they can make more money by doing a pre-sale today and having the closing three or four years from now. 

“As a result these builders are charging the future value of that unit, not what the unit is selling for today.” Susiwala stated that it will be a “huge issue if the trajectory of the pricing and the appreciation doesn't continue as it has.”

The census data indicates high rises are more common in Waterloo and Kitchener, more so than in Cambridge. Susiwala noted from a municipal, developing, and political perspective, the K-W area “have got it right,”

“They have been able to envision where the growth is going to be. They have allowed for zone changes to occur. They have allowed redevelopment and regeneration to occur at a much faster pace than Cambridge has.”

The K-W industries have also catered to the condo living, where everything is easily accessible. Susiwala noted the city of Cambridge was “just a little late to the party.” However, he believes in the next three to five years there will be an increase with mid to high-level rises buildings in the Cambridge area.

Susiwala said when working with clients, Millennials and young generations are forced to buy high-rise or condos, sometimes even rent condos for the purpose of affordability.

“The lack of redevelopment and lack of detached home development is because the cost of land by the linear foot is so high today. It doesn't make sense for detached homes to be built on these lots. We will see the demand increase, but Millennials will be renting from investors or people who have multiple units in the condo building.”

Construction costs have sky rocketed and builders will not build homes for cheaper.

“Right now, is the time to take advantage as a first-time home buyer. There is an opportunity in the next three, six, nine months to get into the market. But, this experience of price dropping is only going to be short-lived. Builders cannot build homes for cheaper than they could have two years ago.” Susiwala added.