Builders are always looking for bargains, so it caused quite a stir when a pleasant backsplit went on the market in North York’s Willowdale area earlier this month for what may have seemed like a crazy amount to anyone else — $1.1 million.
It didn’t matter that its four bedrooms featured a virtual rainbow of wall-to-wall carpeting, or that its panelled kitchen was far more dated than designer.
All that counted to the dozens of interested builders who filed through the front door the first two frantic days was the patch of grass and asphalt on which the house has stood since 1961 — all 40 by 131 feet of it.
By Day 3 some 17 offers had been registered. The best was for $1.551 million — more than $400,000 over the asking price.
“Seventeen isn’t so crazy. That’s happening a lot here now,” says long-time next-door neighbour Johnny Yoon, who is also a realtor in this booming Yonge St. and Sheppard Ave. area.
This once-sleepy suburban neighbourhood is one of the hottest real estate markets in Toronto right now, partly due to demand from wealthy Persians and Chinese.
All that foreign interest has spurred a staggering remake of this quiet residential pocket that started some years ago but has exploded, this year in particular, in bidding wars for its relatively tiny postwar homes, simply because of lots, which tend to average 50 feet, but can stretch in some cases to 70 or 90 feet.
It’s also helped skew overall real estate values for Toronto as original houses are replaced with new ones coming on the market at two to three times the former price.
Willowdale is far from alone. Rebuilds have broken out all along aged City of Toronto streets as builders cash in on the massive move to intensification across the region and a greenbelt that has set firm parameters on how much land is left for residential development.
“You’re just seeing a lot of market forces at play now,” says land economist Mark Conway of N. Barry Lyon Consultants, who’s seen a significant pickup in teardowns in his own Scarborough Bluffs neighbourhood.
“It’s pretty easy for me to understand why people are doing this — the economics are completely in line with the market when you consider that a detached house in the City of Toronto is worth over $1 million now.
“It’s definitely changing the character of neighbourhoods and it’s certainly not good for affordability. But it’s inevitable. We’re becoming a victim of our own success as a city.”
Values have especially skyrocketed in central Willowdale because its quiet, tree-lined streets are close to two subway lines (Yonge and Sheppard), highways, top-ranked schools and a host of big-city amenities — all of that now at a discount, thanks to the weak Canadian dollar.
Peyvand Jalali, one of the top real estate agents in the area has a roster of developers looking for original homes to raze and rebuild. Land values alone have escalated so dramatically the last couple of years in this area just east of the North York Civic Centre that Jalali says banks are appraising most original homes at 97 per cent land value.
That means a developer can buy an existing home for $1.5 million, tear it down, build a top-of-the-line new 3,000- or 4,000-square-foot home and make $500,000-plus, with prices now heading north of $3 million for rebuilds here boasting suburban-style basics like grand family rooms, granite-clad kitchens and spacious ensuite bathrooms.
All the demand is also being felt at city hall, where applications for zoning variances are up dramatically and there’s growing pressure from builders to go bigger than ever or sever 50-foot lots and build two homes, instead of one.
“It’s just becoming the Wild West,” says area councillor John Filion who has a dedicated staff member charged with keeping on top of rebuilding requests.
“We have bylaws for a reason and you are supposed to have a good reason to vary them, and a good reason isn’t because you want to make more money.”
Some realtors have taken to going door-to-door, says Jalali, searching for owners of original homes willing to sell. Developers like Kingsgate Luxury Homes, which didn’t return phone calls from the Star, simply post signs at existing build sites: More Lots Wanted.
All those new builds aren’t all bad, stresses land economist Conway.
Much of the city’s housing stock is aging out and not built to modern standards. They are tiny for today’s families, lack ensuite bathrooms and workable kitchens but, more importantly, they “just aren’t healthy.
“They aren’t insulated properly, some have asbestos and urea-formaldehyde so there’s good reason to rebuild many of them anyway.”
Willowdale by the numbers:
46.8 % — GTA house price growth in past 5 years
63.5 % — Willowdale house price growth in past 5 years
$230 to $250 per square foot — average cost of top-of-the-line rebuild
$1.5+ million — average price of original house on 40-foot lot
$1.7+ million — average price of original house on 50-foot lot
13 — applications to sever lots in 2012
20 — applications to sever lots just to October 2015
177 — applications for variances to build bigger homes in 2012
247 — applications for variances just to October 2015
SOURCES: thestar.com By: Susan Pigg Business Reporter, Published on Sat Oct 24 2015