Montreal Condo – The utopia of social expectations versus densification of cities

 

Whenever a developer is about to build a residential high tower we will often here speeches from opponents like: “We must limit the height of buildings, put more green spaces, make it more accessible to low-income families, etc… ”

While the intention behind this message is creditable, it remains utopian. It remains that urban sprawl is a principle of development much less environmentally friendly than densification especially versus construction in height.

Montreal Real Estate Densification

This vision of development is like looking through rose-tinted glasses not taking into account the real cost of construction and the market value of the land.

For a fairly long time now, scarcity of land is increasingly felt on the Island of Montreal (Yes an island). Land is therefore taking value faster than what is built under the pressure of a tight supply versus an ever-growing demand.

We may well want to mention the different areas of the island that are less densely populated, they will also sooner or later occupy their place on the universal curve of urbanization of cities, one day or other sparsely populated areas will see their value explode despite the degradation of what is built.

You can’t talk about increase in value without mentioning an increase in property taxes. You can’t talk about degradation of what is built without mentioning the need to renovated thereby adding value to the land. We cannot expect to stay under the maximum sale price desired by utopian social groups considering the cost of purchasing a building plus the renovations. Cost is the absolute minimum price regardless of social intention.

Developers will not make real estate projects at a loss; their profit margins are very reasonable to begin with. Many will tell you that it is the government’s job to subsidize these programs. The government already does and can’t do more faced with the financial reality of the Quebec. Budgets have their limits, they are interconnected, and if we further invest in affordable housing or housing programs, where do we have to cut from Education? Health? Jobs?

In a context where Quebec is already living beyond its means, what are the solutions according to you and what are the financial priorities of Quebec between the health system, the education system, infrastructures, pension plans for the employees of the province, economic development, etc. versus subsidies for affordable housing? The question arises as to who is responsible to make 3 bedroom units accessible to young families?

Montreal Condo

The profit margins of developers are very sensible; they cannot take this financial responsibility. If we impose the developers to make 3 bedroom units available for a maximum price, the balance of the other condos’ buyers will pay the bill. Nothing is lost, nothing is created if you cut the price, and the developer that is not subsidized will have to in product quality or increase the price of the balance of the project. The land, materials, labor cost remain the same whether the intention is social or not. No promoter will build projects at a loss of course …

Densification des VillesPersonally, I think it is the responsibility of provincial, federal and municipal governments. Offering discounts on properties of municipal, provincial or federal to developers in exchange for an obligation to build condos or entire projects oriented to families can be feasible if the discounts are reflected in the land thus making the projects affordable. There will always be an ultimate floor price, let’s not dream the impossible because prices will continue to rise. There is a natural rarity at stake, Montreal is an island and let’s not forget that scarcity means less supply despite a rising demand for land and an increase in construction costs. It has nothing to do with the appetite of developers; contrary to popular belief, their profit margins are much lower.

It is collective responsibility and social decisions that should not destabilize the economic equilibrium, because just as in France, and Greece, etc. where such social measures are put in place aggressively, the economy takes a downward turn and we will have to dispose of everything to achieve our goals. Everyone would like everything to be free, but the budget has its limits, we must make choices within our means and not do it on credit to the detriment of future generations as it has been done in the past. I invite you to share your realistic solutions in terms of the Quebec economy.

 

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Patrice Groleau , owner & certified real estate broker

Patrice GroleauPatrice Groleau was born and raised in Quebec. He completed a Bachelor’s degree in human resources at the Université du Québec à Montréal, as well as a graduate degree in Entrepreneurship at the Université de Sherbrooke and in Advanced Project Management from McGill University in Montreal. Patrice Groleau obtained licenses in Risk Management from the Université du Québec à Montréal and Canadian Securities from the Canadian Securities Institute, as well as a Real Estate Agent degree and a Chartered Real Estate Broker’s & Agency Excecutive Officer (AEO) degree from the Collège de l’immobilier du Québec.

Member of the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) and of the Greater Montreal Real Estate Board, Mr. Groleau also has a solid background in finance, having worked for several major financial institutions.



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