Struggling U.S. economy lifts tower construction in Toronto

Toronto’s highrise-housing building boom should continue to climb skyward for the next couple of years thanks to the sputtering U.S. economy, Toronto Real Estate Board president Richard Silver says.

A decision by the U.S. government to keep federal interest rates low for two years will likely benefit Canada’s — and in particular Toronto’s — housing market, he said.

“We’ve had low interest rates,” Silver said. “But now you can feel pretty secure for the next two years because the (U.S. government) will not be increasing their rates, so chances are Canadian banks will not increase their rates as well.

“You’re going to see a long time with low rates, which is pretty unheard of.”

The number of cranes in the city is definitely unprecedented

—John Mollenhauer

Today, 136 towers are under construction in the city, said Richard Lyall, president of Rescon, an association that caters to builder interests and issues.

That number represents a large proportion of highrise construction in the country, Toronto Construction Association president John Mollenhauer said.

“We’re told that upwards of one-third of the cranes in Canada are in the GTA,” he said. “The number of cranes in the city is definitely unprecedented.”

A key benefit of the tower-building boom is increased employment, Lyall said. Any of the construction sites can employ anywhere from 50 to 600 people, not including designers, accountants and marketers, he said.

“(The number of workers) is in the many thousands, and of course they’re by and large highly skilled, well-paid jobs,” Lyall said. “Whatever way you look at it, it’s big and it’s important to Toronto’s economy.”

The city’s highrise growth is sustainable for the foreseeable future, Mollenhauer said.

“The bank of Canada’s chief has said, ‘We are going to keep Bank of Canada interest rates low until at least mid 2013’, and that bodes well for our industry,” he said.

The market for highrise housing remains strong, Silver said, thanks in part to the estimated  100,000 new immigrants coming into the city every year.

“There might be a point where (the market) gets overheated and people start saying, ‘Enough is enough’,” he said. “But at the moment I’m just not seeing that.”

The greatest threat to Toronto’s upward growth is affordability, Lyall said.

“You’ve got land prices increasing nine per cent per year,” he said. “New home prices, probably as a result of that, are increasing almost six per cent per year and you’ve got government-imposed costs on new housing.

“It’s not a sustainable trajectory.”

For these reasons, Lyall said, analysts have predicted a levelling off of the market in Toronto rather than a crash.