Real Estate Market Outlook with Ben Myers

Senior VP Market Research & Analytics at Fortress Real Developments which helps to finance various condo developers.
Is there too much supply of condos in the market?
Is there an impending crash coming?
What are the trends in the sizes of condos? Will families be expanding into condo?
What’s happening with foreign investors?

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Davelle M.:        On today’s episode, we have Ben Myers, Senior Vice President of Market Research Analytics at Fortress Real Developments. Welcome, Ben.

Ben Myers:        Thanks for having me.

Davelle M.:        Awesome. Thanks. So tell us a little bit more. What do you do at Fortress and how does it relate to real estate?

Ben Myers:        Sure. Fortress Real Developments is a real estate development company. We partner with other builder developers on most of our development projects, a lot of them. Our major responsibility is sourcing equity, sourcing debt financing and helping development along on the financial side as well as to the construction side of things.

So what I do is, I underwrite or do the due diligence on the deals that are presented to us, either from a [inaudible 00:01:22] developer or a broker. I look at them from a revenue perspective, so I look at what the unit can sell for. Is it the right market that we want to be in? Is it the right neighborhood? Is it the right built form? Is it the right product type? Is it the right unit size? Is it the right mix of units? The right amenities, the right features and finishes and that’s kinda where my level of expertise comes in.

And then on top of that I kinda produce reports for our stakeholders, either general public, folks that raise capital on our behalf, or our development partners on macro level trends that are happening at a national level and that are happening at a municipal level and are happening on a neighborhood level. So that’s kinda my main focus at Fortress.

Davelle M.:        Perfect. That’s great. That’s very broad. One of the things that you touched on in terms of: you’re looking, you’re researching trends. So in terms of trends and sizes of condos, what are your thoughts about people saying that people are going to be starting to raise their families in condos? Do you see that as a valid trend in your business? What are you seeing?

Ben Myers:        Yeah, I know, it’s interesting. I did a survey of realtors recently and for my next market manuscript with Fort, which is kind of a robust report that I put out to the market on trends. So when I went and asked realtors what they thought, it was interesting that a lot of them thought that yes, for the next five to 10 years that’s gonna be a big trend and even a few of them indicate that they’ve already sold a number of condominiums to families.

I think it’s inevitable that it’s going to happen and I think it’s gonna be obviously a slow process but it’s a necessity to live in the Greater Toronto Area for us to expand vertically. There is, obviously there is a really tight supply in the Greater Toronto Area, especially in the core where essentially built out of any what we call green-filled lands and in the city of Toronto, Mississauga, Scarborough, North York. There’s very little land available for low-rise housing unless you’re demolishing a strip mall or something that’s already existing. There’s very little land to just do massive single-family detached communities. You know, if people want that they’re being forced to drive farther out or pay very, very high fees. So if people want to stay in the city, they’re looking at alternatives to spend more time with their family and spend less time in their car. So they’re looking at buying condominiums to kind of service their needs. So it’ll be interesting to see how that trend starts to evolve.

Davelle M.:        Yeah, absolutely. Definitely. And what would you say about the condo supply in Toronto right now? Do you think it’s adequate? Do you think it’s inadequate? There’s always lots of talk about: oh, we’re facing a condo bubble, they’re building too many units. What do you say to people like that, Ben?

Ben Myers:        Yeah, I know, it’s interesting. For the longest time we were delivering in and around 10 to 15 thousand new condominiums a year in Toronto and that had served the market fairly well. We had a major sales boom in 2011, which resulted in: somewhere in the neighborhood of about 25,000 new condominium sales. So you give those projects a year in pre-construction and then two to three years under construction. We saw a major increase in the second half of 2014 into 2015, just a lot of projects coming to completion. So I think for a 12 month stretch there I think we had about 26, 27 thousand completions bordering on 30,000 completions in like a 26, 28 month period. So just a lot of supply came from online and an amazing thing that happened is, they all got sucked up and everyone expected there to be at least some flatness in the market but if anything it started to pick up. So, very interesting. It totally wasn’t expected with that major level of increased supply that we would continue to see prices gain, and not only gain, but gain more than they had in the past.

I think people want to be in Toronto and I think young people aspire to come to the big city from London, to Guelph, to Kitchener, to Brantford, to Windsor. You know, obviously a lot of people are gonna stay in Kingston, or in Ottawa, or somewhere further west, but I think a lot of people desire to come to Toronto and if we can keep producing high volumes of condominiums and keep the prices relatively in check, where a lot of people 300,000 seems like a lot of money, but in a global sense, in a city of our size and a region of our size to still be able to house a single person in 250 to 300 thousand for a unit is pretty affordable. So I want to see as many new condos as we can produce and that doesn’t result in an oversupply situation because I think it’s an inclusive city, a city that can have first time buyers and young people in their twenties. It’s just a huge advantage.

Obviously we’re seeing what’s happening in Vancouver with people getting priced out and young people actually deciding to leave the city because of the dispute over the issues, alright? So that’s obviously anecdotal. I haven’t looked at the latest census to see how much of that is happening, but we want people to come to Toronto and live in Toronto and start their careers here and be able afford housing. I think cities are best when they are able to provide housing from someone that’s 22 years old all the way up to someone that’s 90 years old.

Davelle M.:        Yeah, absolutely. Definitely. I mean it’s funny. The one thing I’ve noticed in resale condos this year is that, over the last few months, is that as an agent, if I don’t get my client into a great condo within the first 48 hours, it’s sold. So a lot of condos now are actually just having offer dates the same way that they do for houses, because as much as people kept talking about, there’s too much supply, there’s too much supply, it actually appears that in the condo world there isn’t enough supply of what people want and so it’s causing bidding wars for condos and I think that’s something that people really never saw coming, given all the doom and gloom out there about overbuilding, but when I’m sort of working day in and day out I certainly don’t see that.

Ben Myers:        Yeah. No, it’s interesting what’s happened. I mean, obviously the majority of the downtown condominiums, but like pre-construction of new condominiums are being bought by investors and a lot of those investors are looking to rent them out longterm. They believe in a longterm appreciation. They believe in the rental market and we’ve seen the rental market rates appreciated at a fairly brisk rate recently, so a lot of the small units are being rented out because investors tend to like those small units, developers are not building as many of the larger units that a lot of the end users desire, so there’s a little bit of a disconnect between what’s being built in pre-construction and what’s actually being demanded in the resale market, right? So it’s creating an inflation in the larger units and in the smaller units there’s still some competition with a lot of those small units that are in the rental market as opposed to in the resale market.

So it’s interesting how the market is evolving. We’re starting to see developers who are now adding more larger units to their pre-construction buildings because there’s obviously investors that only want to be in one or two years after registration, so they see the value in having some larger units and being able to sell those in a market where there’s not a lot of them. So they see the trends coming and are buying into them and obviously there’s still end users that buy in the new markets, not 100% investors. There’s still people that are living in a condominium now and they say, you know what, in three years I’m ready to move up to something larger. I can see the writing on the wall in the low-rise housing market. It’s going up anywhere from 10 to 20 percent year over year depending on the month. So in three years from now when I’m actually ready to make that move it may be just so out of reach that I’m not comfortable with it. So why don’t I buy into a pre-construction condominium and I can either move in it or if my employment situation has changed maybe I rent it out and maybe I can rent the rooms out.

So there’s a lot of different options for people out there, especially with such a strong rental market. So people are looking at it in several different angles when they’re going into a [inaudible 00:09:41] to buy a new condo.

Davelle M.:        Yeah, definitely. I mean, one of the things you touched on is the investors and maybe we could talk a little bit about the foreign market because it’s certainly in the news quite a bit and I always wonder, why can’t they measure what the foreign ownership levels are in Canada? I mean, I find it interesting that the state of Florida seems to know over the last couple of years that Canadians were the largest buyers of real estate in their state and then recently the Chinese beat out the Canadians. And I always think to myself, how is it that the state of Florida is so buttoned down that they know their percentages but our country cannot figure that out? So what’s the answer to that? Why can’t we get our act together?

Ben Myers:        Actually, well I think the governments have made a kind of a mandate to start tracking that information to get more buttoned up, but I mean, I think the issue that I’ve said several times in the past is that it’s foreign capital, not foreign buyers that are buying real estate and the important thing is there, is they have people that live here. They’re not just throwing a dart at a board and saying, should I buy Toronto, should I buy Vancouver, should I buy Miami, New York, San Francisco? They generally buy into areas they’re familiar with and that often means they have relatives living here, they have friends living here and they may actually even have their spouse living here and they’re planning on moving here, right?

So anytime you see an actual foreign buyer on the list of pre-construction condominium projects, they generally have some type of tie here. Their child is going here as a student. They plan on trying to move here. But on the other hand, yes there’s a lot of locals that are buying but the money is coming from grandpa or grandma or a relative overseas and they’re funding some of these purchases, alright? So that’s why it makes it so much more difficult to track. I’ve said to people, I have relatives in England. If one of them passed on and gave me inheritance and then I took this inheritance and next year I decided to buy a couple condos with it, well it’s obviously foreign money, but it’s certainly not a foreign buy because I purchased it and how do you ever track funds that are coming into this country and what they were eventually used for two years down the line, or three years down the line, or four years down the line, right? It’s virtually impossible to do it, right? That’s what makes it much more difficult.

So that’s why I think that the foreign tax is not gonna have a huge impact once two years or three years are down the line in Vancouver and I’ve said I wouldn’t recommend a similar tax in Toronto.

Davelle M.:        And so it’s funny ’cause I had chatted with a friend of mine whose family members were real estate agents out in BC and they felt that because the enacted literally right away, that there were deals that hadn’t closed yet, that all of a sudden were going to be effected by the tax. So there are people now that couldn’t close on deals that they had actually bought already. So I thought that was interesting that they didn’t give people enough notice to say, if you already have your deal done, don’t worry about the tax. It’s going to be for any new deals from a particular day forward, you know?

Ben Myers:        Yeah. It should have been grandfathered in and it made absolutely no sense. It’s really unfair [inaudible 00:13:03]. Everyone wants to think it’s money laundering rich Chinese people that are buying all the condominiums, but there’s a PhD student that just finished his masters degree at UBC and he’s starting a new job, he just bought a new condominium unit and his closing date is August the 4th, right? And he wants to become a Canadian citizen, right? They’re screwing with these people, alright? They’re responding to the people that are speaking the loudest and a lot of those people it’s xenophobic in nature and it’s disappointing, right? The major issue that’s impacting the Vancouver housing market is just a lack of supply. I mean, they are building vertically, obviously, but there’s still a huge demand and same thing happening in Toronto. People like low-rise housing, right? So they did that. Those prices are up very, very high, and then there’s restrictions in Vancouver in terms of heights of buildings in terms of infringing on residential neighborhoods. There’s just all kinds of restrictions on buildings, so the market can’t effectively respond to the demand, right? And then obviously in any of coastal, these well, you have the issue of geographic constraint on where you can build, right?

People just don’t seem to understand that the reason that prices in Calgary and Edmonton don’t go up as much as Vancouver and Toronto was they can expand in 360 degrees essentially, around the city. There are newer cities where the core is not where all the employment is, where as some of the older cities the employment was stuck right near the water, right? That’s why you see areas like Boston and New York and San Francisco, their prices going through the roof, ’cause they have a constraint on people getting to where the major jobs are, right? And you can’t commute from the South, right? Unless you have a high speed boat and you live in Rochester, right? (laughs)

Davelle M.:        Yeah, of course. (laughs)

Ben Myers:        It impacts the market and I think for the longest time in some of these cities when they were smaller and they had less population you could get in your car and you could get in your car and you could drive 30 to 40 minutes, but now that the congestion has just gone through the roof in a lot of these major cities, you just can’t spend two hours in your car trying to get to work, not only for the time, but for the frustration of it. (laughs)

Davelle M.:        (laughs) Yeah. Certainly not during construction season.

Ben Myers:        Yeah, so it’s forcing people to reconsider the trade-off between commuting and living downtown and paying a higher price for housing.

Davelle M.:        Right, absolutely. But I mean, when you to look longterm, people always say, in economics all markets are cyclical, and in the Toronto real estate market it seems to have been just going up, flat, up again, maybe stopped a little, but really up, up, and up. So I guess my question to you is, I mean, yeah I am very positive about the market, but at some point is there going to be an economic cycle where things don’t go so well?

Ben Myers:        Yeah, so of course there will be. I mean, we’ve been very, very fortunate that, other than a tiny blip in late 2008, early 2009 in the condo market and there was even a little bit in 2012 and into 2013 in the new condo market there was a bit a slowdown there, but otherwise it’s been very, very strong for 17, 18 years, right? So it’s really an unprecedented appreciation in the marketplace, but when we have a major recession and we will have another major recession and it will be something that is unexpected, something that obviously in Calgary they didn’t expect oil prices to go down 70%. We certainly didn’t expect oil prices to go down 70% and that impact the market. Luckily in Toronto we’re a little more diversified in terms of our employment base. We’re not a commodities driven market. That’s in the one sector of the economy that’s influencing the employment, so we’re a little more isolated that way, but a recession will hit and prices will go down and really it’s gonna be anyone’s guess how much they go down and how difficult it is for people. Now it’s like the faster they go up, the faster they go down, alright? So if Vancouver prices are going up 30% a year, well they’re much more likely to go down 30% than Toronto that’s going up 12% a year, right? The likelihood that they would go down 30% is much less, alright?

So it’s certainly something, I get nervous when prices start to get into double-digit annual increases, but I look at it across the board. I don’t just look at the overall market. I look at what are single detach doing. What are semis doing? What are towns doing? What the condo market is doing and we try to guess, try to make an assessment that way, alright?

Davelle M.:        Sure. Do you even think or predict when you think that there might be more of an economic downturn in the market? Do you think that’s five years away? Do you think that’s two or three years away?

Ben Myers:        (laughs) I wish I had a crystal ball.

Davelle M.:        (laughs) What? You don’t? [crosstalk 00:18:15]

Ben Myers:        I could tell you. I mean the world is so, we’re living in such a globalized nation now, so interconnected to all the financial markets that something’s gonna happen. There’s always some greed. There’s always something that throws the market for a loop and I wish I knew when it was coming or where it was coming from but I can’t, right? So it’s certainly my advice always to anyone that’s either buying for their primary residence or buying for investment is, buy for the longterm. Never go into a real estate purchase thinking I’m gonna sell this in a year or I want to flip this in two years, because you never know what the market’s going to be like in two years and you never want to be in a situation where you’re forced to sell. That is the worst situation that you want to be in and that’s how people lose money. When they lose their job and they can’t afford their house, then that’s when they lose money and obviously you can’t control when you’re gonna lose your house but buy below your means. I mean, I preach that. People say, oh you’re a developer, you want everyone to buy. Well no, I don’t want everyone to buy. I don’t want to be in a situation where more bridges are underwater and things are really bad for an extended period of time, right?

I mean, we have lots of investors. We have lots of investment units for people for people to rent in, right? If that works better for their lifestyle then that’s only better for real estate investors that we have in our kind of Fortress family, right? So I mean, I want people to buy what they can afford and yes, it’s frustrating that prices go up. I’m in the same situation. My wife wants a bigger house. She wants a backyard and a two car garage and all that fun stuff, but I refuse to live beyond my means and if the situation presents itself where we can afford that type of home in the future then maybe we’ll move and maybe we won’t, right? And certainly I’d give the same advice to anyone else that’s in the marketplace.

Davelle M.:        Yeah, absolutely. And then so when you read the newspapers over the time, over the last few years, lots of doom and gloom. Every year, whether it’s The Globe, or Macleans, or it just seems like almost every Canadian publication is printing the same article about the doom and gloom in the market, the crash, the crash, it’s coming, it’s coming. Now every single year they get it wrong. I think I’ve probably read the same article for the last 10 years every single year and I’m always amazed that they never actually go back and go, hey wait a minute, we got it wrong. Let’s go back and think about what did we get wrong? What’s going on? What are your thoughts about that?

Ben Myers:        Yeah I mean, the newspapers, I mean, their mandate is to present the news, but their mandate is to get the people to read and get the people to buy their newspaper or go to their site, right? And as sad as it is, bad news sells better than good news. It’s just a reality, right? When you turn on the evening news, will they talk about the crash here, the person that got poisoned there, someone got killed over here, right? It’s unfortunate, but very rarely is the lead “boy saves puppy from tree”, right? It’s just “Market Stable”, alright? They don’t talk about companies that just hired 2000 people, right? They talk about a company that laid off 2000 people. It’s just the reality of it. People click on those articles much more frequently than they do positive articles and it’s unfortunate, but that’s the nature of it and people will always want to give people the possibility of something going poorly, right?

Unfortunately a lot of the analysis that’s being done is not particularly good analysis, or are weak, or are given weak statistical arguments, alright? And very rarely do people understand other markets that are similar to ours and what’s happening in those markets and why those markets went up or down, right? It really takes a little bit more, I mean, I’ve been doing this for real estate analysis for over 15 years and I’m still studying all of these markets and trying to understand why one went up and why one went down and what trends are influencing each marketplace. It’s so much different between each market that can change the data that comes out of those markets, right? So it really kind of takes a level of expertise to understand it, but again putting an upside down house on fire on the cover of your magazine is gonna sell some magazines, right? I bet ya the author of that article really doesn’t believe some of the things that he’s writing anyways.

Davelle M.:        (laughs) Right, that makes sense. I think you touched on it earlier saying your wife wants a bigger place, so do you own or rent and are you in a house or condo?

Ben Myers:        We live in a condo town home, so for me it’s kinda the best of both worlds, right? I don’t want to climb on roofs and get leaves out of gutters, or wash windows, or cut grass, or do gardening, right? So my house is nicely well maintained along with all the other town homes on my block. I mean, I have no backyard to worry about, so I don’t have to maintain that, but we live right beside a park so I take the kids over there. There’s a little kids area, so that’s where I take the kids. A place for the dog to run around close-by. So for me it’s kinda the best of both worlds. I’m in the city of Toronto. I’m in the upper beaches area, so I’ve got a streetcar there. I’ve got a GO train stop, the last GO train before Union Station, so it takes me 12 minutes to get from there down to Union Station subway. It’s close-by. I can walk to it in five minutes, but I still can drive to a grocery store and park. I can drive to Big Box.

So for me it’s kinda the combination of everything, right? It’s a condominium so I don’t have to worry about the maintenance, but it’s still a low-rise. I don’t have to park four floors underground a condominium and walk my way up or wait for elevators or any of that. So for me it’s kind of the best of both worlds. It almost feels like the suburbs but it’s in the city and it’s still condominiumized, so I don’t have to deal with all that other BS, but I still have kind of the comforts of a low-rise home, so for me I really like where we live. I bought it new in 2009, so I had it under warranty. It’s got ceilings that are high enough for a six foot six guy. I have zero skills in being handy, so that’s why I prefer to buy new, so I don’t have to fix anything. (laughs)

Davelle M.:        (laughs) That makes sense. I think it’s always about recognizing where your talents and strengths and weaknesses are and buying accordingly. That makes the most sense to me. Awesome.

Ben Myers:        Yes, exactly.

Davelle M.:        Well, thank you so much for joining us today, Ben. Ben, if people have questions, if they want to get your manuscript, how should they reach out to you?

Ben Myers:        Yeah, so the two best way is to is the company site. My Twitter is benmyers29. So that’s a good way to reach out to me. I tweet [inaudible 00:25:29] my articles I do in The Sun and the New Condo Guide and as to my writing, RENX magazine, Huffington Post, so a bunch of the stuff is my writings I link onto my own Twitter page. I have conversations about the housing market on a fairly regular basis, so a lot of information there that can be found on my Twitter page and at

Davelle M.:        Perfect, great. Well thanks so much for joining us today, Ben. That was Ben Myers, Senior Vice President of Market Research & Analytics at Fortress Real Developments. Thanks everybody for listening and you can find me at Davelle at, or at Twitter @DavelleMorrison, or on Instagram @davellemorrison. Thanks everyone for listening. Bye for now.

Announcer:       You’ve been listening to the Morrison Report. Hosted by Davelle Morrison, Sales Representative for Bosley Real Estate Limited Brokerage, Real Estate Investor, and Bestselling Author bringing you insights on the Toronto real estate market. Join us for another podcast.