Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 361

Good morning from rainy New Hampshire.

It’s been raining all morning, but apparently there is an ocean hidden in the above picture. We also got in after dark and so all I really saw was what I could see on the drive from the airport.

Whenever I am reminded that the vast majority of built form in North America is car-oriented in nature, I can’t help but think of how sticky all of this is going to be.

Witold Rybczynski put it accurately when he said, “urbanism and architecture observe different time lines.” Buildings may take forever to build, but relative to urban form, they actually change pretty quickly.

New materials and styles emerge, and so do new buildings. But the streets that surround them change so slowly, that for all intents and purposes, they mostly don’t change.

What that means is that, for better or for worse, most of what we see is likely to persist. No wonder there is an arms race going on with autonomous vehicles.

One way you could oversimplify the Canadian economy is to say that it revolves around three things: natural resources, real estate, and high immigration. (You can tell me I’m wrong in the comments below.) More recently, we’ve also been touting the growing number of tech workers in our cities. But in some ways this is a bit of a vanity metric. 

I think of it in terms of two different categories of workers. There are tech workers that are the result of foreign companies opening satellite offices to take advantage of the weak Canadian dollar and our more enlightened immigration policies. And there are tech workers that are the result of Canadian-based companies innovating, growing, and needing more talent. Think Shopify.

The former situation is not at all bad, but a lot of the value is going to accrue outside of the country. Whereas in the latter situation, we get to be the principal recipients and we get all of the positive externalities associated with innovation and entrepreneurship. One of these is a powerful compounding effect. Successful startups tend to beget even more new companies. 

So even though I work in and benefit from one of the three things that I mentioned at the beginning of this post, I believe that we need to be much better at encouraging a culture of innovation and entrepreneurship in Canada. We’ve become too complacent.

This is a critically important topic that we don’t seem to be talking about nearly enough. So I plan to do more of that here on the blog.

If you really need a new home, then I guess this makes sense :

We thought rising mortgage rates would crush the homebuilders, and bet against Pulte in the FT stockpicking contest. But the exact opposite happened: high rates froze the existing house market by giving homeowners a huge incentive not to move — their irreplaceable cheap mortgages. That left new homes as almost the only game in town for anyone who really needs to buy a home. Pulte has been one of the best- performing stocks in the S&P 500. Never pick stocks, even in a stupid stockpicking contest, on the basis of superficial research.

And here's a chart that supports this argument (new homes as a % of total single-family home inventory, including resales):

It's an interesting nuance.

But it's certainly a different story here in Toronto with new condominium sales. According to Urbanation, in the first half of this year, the Greater Toronto Area sold 6,727 new condominium homes. This is down 59% compared to 2022, and represents the slowest first six months in a decade.

In this case, higher rates have dramatically slowed the market.