This blog post is about condos, urban cores, youthification and the donut effect.
I was talking with a reporter recently who was in town doing this story about Waterloo housing. She asked me about who was buying condos. She pointed out quite correctly that in Kitchener Waterloo the price to buy a condo unit is very similar to the price of buying a small home, say a little bungalow in UpTown Waterloo. She pointed out that the average house price and the average condo price are very similar here in Waterloo Region. In Toronto, and three other major cities in Canada, by contrast, the average price gap between condos and resale homes recently hit $320,000. This gap has more than doubled in the past decade. In the past decade, the average resale price of houses in urban centres grew by 90% while the price of condos grew by just 48%. It is true here too that house prices rise faster than condo prices – last year in KW single family homes rose by 4.3% whereas condos rose by 2.5%.
Supply and demand. All over North America, there is a trend to move back into the city centres and there simply is not the supply of urban listings available to meet this demand. When demand is higher than supply, prices rise. That is Economics 101. The demand for urban housing has been increasing for nearly two decades but the supply has not kept pace, except for condo developers in Canada’s biggest cities who have rushed in to fill the need, essentially keeping prices closer to where they should be.
But back to the reporter’s question about who is buying condos in Waterloo Region? (And here I’m talking about high-rise condo units). Who’s buying condos? Not down-sizers and empty-nesters. They can’t handle the lack of space and condo fees. They need parking for two cars. They are not willing to sacrifice anything for a lifestyle they don’t need. Everything is 20-minutes away in Waterloo Region. There is nothing really to be gained for boomers and zoomers living in The 42, 144 Park or the Bauer Building.
There was a great story in The Atlantic recently about the youthification, (not gentrification) of neighbourhoods. Youthifcation is defined as an influx of young adults moving into higher density urban neighbourhoods. The condo corridor of UpTown Waterloo could be our local example of this. The area developing around King and Victoria will be another. In these neighbourhoods, young first-time homebuyers churn through condo units before eventually moving into single family homes. Jobs, transit, nightlife, walkability, and cultural amenities are high on their list.
A recent study published by the University of Virginia looked at 66 US cities and found a “donut effect”. City centres and outer ring suburbs are doing well economically but inner ring suburbs are struggling. Urban cores revive and attract younger, richer and more educated residents, who then move on to buy their new single family home in the outer suburbs. I can see this happening to some extent in Kitchener Waterloo but I think the LRT is going to be the ribbon that ties us all together.
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Photo credit Homer