It is increasingly common to run across house rebuild sites in urban Toronto. I spot them regularly as I drive and cycle through the neighbourhoods. A number of different factors can prompt property owners to rebuild. Many of them co-exist in the current Toronto real estate landscape, resulting in Toronto becoming this hotbed for home rebuilds. Unless these factors disappear, we will continue to see the trend grow as rebuilding becomes a more recognized and viable alternative to renovating.
Here are five major factors that promote rebuilding:
- People want to live in central, established neighbourhoods
- Renovating is risky and expensive
- Buyer gridlock
- The value of the land is high but the value of the house is not
- Greater wealth created by the rapid rise in land value
People want to live in central, established neighbourhoods
People want to live in popular neighbourhoods with good amenities, schools, transit, retail, restaurants and more, that are within a reasonable commute to downtown Toronto. Individuals, couples and families are increasingly interested in these neighbourhoods, which rarely have vacant lots. Often the only choice is to buy existing houses, which are generally not suitable for modern living, and make it work for them. Many compromise on the size and condition of the house intending to address these issues after purchase.
Renovating old homes is risky and expensive
Renovating old homes is not straightforward. Unexpected issues can arise because of the vagaries of older homes and prior renovations. In Toronto, it’s not uncommon for renovation projects to grow in size and expense as the walls and the floors are opened up making creative plumbing and missing or damaged structural supports visible. Surprises like these inevitably lead to more expense, time and stress. With budget reallocations, aspects of the originally planned renovation are deferred. Rebuilding may have seemed like the more expensive proposition but, in the end, renovating may not prove to be cost-effective either. Homeowners often regret not considering a rebuild more seriously. This is a major reason we chose to rebuild.
Homeowners who bought what they thought was a starter home often become stuck on their property — in Toronto this problem is increasingly common and is called buyer gridlock. It is believed that this is because, with soaring house prices, homeowners cannot afford to move into their next, bigger and better home. As a result, they cannot address their housing needs by moving and must consider the two remaining options: renovate or rebuild.
The value of the land is high but the value of the house is not
In Toronto the value of the land often far exceeds the value of the structures on it. In the last 20 years property values have increased dramatically. On the flip side, houses depreciate and lose their value over time because the materials houses are built with only last so long. In contrast, land can appreciate, causing these properties to increase in value. Once the value of the land exceeds the value of the house, property owners become more open to the idea of rebuilding. Learn more in 7 Important Questions to Ask Before Renovating.
Greater wealth created by the rapid rise in land value
Fortunately, homeowners who purchased their property some years ago have watched their equity grow as the land value has risen. This newfound wealth provides some homeowners with the financial means to rebuild on the same property using construction mortgage financing.
Removing a further barrier to Toronto home rebuilds
In consideration of these existing factors, the main barrier I see to rebuilding is the knowledge, experience and time to make it happen. This is where KAAV LIVING comes in. We can create models for common property types and needs, and make it happen for you. We have the knowledge, time and experience to make rebuilding more accessible, so risky renovations can be avoided.
The first step is a conversation to see how a rebuild might fit your needs. If you are interested in learning more about rebuilding, including how construction mortgages work, I’d be happy to speak with you.