Today, the Bank of Canada has announced its second consecutive policy rate drop to 4.5%.
Condo buyers, who have remained on the sidelines for all of 2024, should take great comfort from this announcement, as it cements the path to lower rates.
Because of what we call “heard mentality”, it typically takes 1.5 weeks for the buyer market to react to rate announcements. This news bodes very well for Palace Place going forward, and it demonstrates that the time to buy is now as prices should increase as activity increases.
Best rates that we have seen so far:
5 year fixed at 4.69%
The next scheduled date for announcing the overnight rate target is September 4, 2024.
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Palace Place, 1 Palace Pier Court, and Palace Pier, 2045 Lake Shore Boulevard West, in Humber Bay Shores.
For almost 27-years, I have compared Palace Place to Mercedes-Benz. Mercedes-Benz had invented the automobile, but what makes their cars so special is the thought, care, and safety that they put into their vehicles. These are the same tenets that Bramalea had put into Palace Place as a condo. In fact, the construction of Palace Place had garnered headlines from around the world. So, when I had learned that Mercedes-Benz was building a condo development consisting of a 67-storey tower and a 65-storey tower in Miami, I had become instantly envious of the project.
That was until I had learned how they were planning to build the project.
While the foundation of Palace Place had been built using extra-deep shaft caissons, these new Mercedes-Benz towers are being built using augercast piles.
A caisson foundation is a foundation system used to support tall buildings by anchoring them to solid bedrock. It consists of a prefabricated cylinder that is drilled into the ground to bedrock where steel beams and rebar are inserted through the tubes and into the rock to pin the caisson in place. The tube is then filled with concrete and capped to support the major columns of the building.
Construction of the Palace Place foundation, extra-deep shaft caissons (C) Luke Dalinda
Caissons are typically used when shallower foundations, like strip footings, cannot be constructed safely. Caisson foundations offer help to resist the tipping effect of winds on the building and to control movement in an earthquake. The world’s largest skyscrapers employ caisson foundations. Caisson foundations offer the greatest stability for large structures, especially at great depths.
Augercast piles are constructed using a continuous flight hollow stem auger that is powered by a drill motor that drills to the desired depth. Then, as the drill is slowly removed, concrete is injected into the cylindrical. Once this is done, pre-assembled rebar cages are lowered into the pile.
While an augercast pile foundation is certainly a capable, recognized foundation solution, it is not the best solution, as it has disadvantages, and it is not a method that has been used often for the world’s skyscrapers.
Among the most significant drawbacks of augercast piles is that the construction method does not allow inspection of the finished, installed product. Other disadvantages include that the connection to bedrock is not as robust as it is in the caisson foundation, contraction and bulging can occur in weak soil zones, and underground water can also affect the integrity of the augercast piles.
The most significant advantage of augercast piles is cost savings, which is the biggest driver of decision-making in all new condo construction today.
Pile foundations come with some degree of uncertainty. Another well-known building that sits atop a pile foundation is Millennium Tower in San Francisco. This condominium residence has sunk 28-inches since 2016 when engineers had predicted 4-6-inches over its lifetime. In this case, the subsurface of old bay mud had allowed the settling to occur.
The foundation is the most important aspect of any construction. You only get one chance to do it right. This is why buyers must realize that newer is not better when it comes to condominium construction because today’s developers sacrifice quality for cost.
Completed in 1993, at a record $200-million, Palace Place was built by Bramalea Limited, Canada’s largest builder at the time. Palace Place was built to set a standard and example for condominiums in Canada.
So, it can now be said that Palace Place has been built better than a Mercedes.
For more about Palace Place, order Luke Dalinda’s book.
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Palace Place, 1 Palace Pier Court, and Palace Pier, 2045 Lake Shore Boulevard West, in Humber Bay Shores.
While this drop is minor, it more importantly signals an end to the high rate uncertainty that had been experienced since the Bank of Canada began raising rates in March 2022. Buyers should take great comfort in this announcement.
This news bodes very well for Palace Place going forward and demonstrates that the time to buy is now as prices should increase as activity increases.
UPDATE:
In response, the banks have already followed with 5-year mortgage rates as low as 4.89%.
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Palace Place, 1 Palace Pier Court, and Palace Pier, 2045 Lake Shore Boulevard West, in Humber Bay Shores.
The Toronto real estate market in 2024 has proven most challenging for key segments, such as homes in the $2M to $4M range and condos above the $1M mark. Many buyers have been waiting for reduced mortgage rates that for the market are well overdue now.
In their April 10 decision not to lower rates, the Bank of Canada had stated, “We are seeing what we need to see, but we need to see it for longer”.
This decision put a freeze on the spring real estate market, which is traditionally the busiest time of the year.
It has long been forecast that the first rate reduction would only be a drop of 0.25%. Many have argued that such a drop would be insignificant.
However, it is not about the amount of the rate drop but the signalling of the end of this high rate uncertainty.
That is what is needed to start the cycle of buying again in many slow markets, like condos.
What will happen on June 5?
In a May 30 report by The Globe and Mail, a poll had shown that 75% of some of the top economists have predicted a June 5 cut in the key interest rate by 25 basis points to 4.75%. Here is a link to that report.
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Palace Place, 1 Palace Pier Court, and Palace Pier, 2045 Lake Shore Boulevard West, in Humber Bay Shores.
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Palace Place, 1 Palace Pier Court, and Palace Pier, 2045 Lake Shore Boulevard West, in Humber Bay Shores.
With the release of the new Palace Place Budget, Crossbridge Condominium Services, which now manages over 800 condos in Ontario, has taken the time to comment on the success at Palace Place.
“Any one of the projects that Palace Place has undertaken in the last year, any corporation would be proud to say they were successful in that, but when you start stacking all of these projects that you’ve undertaken over the past year on top of each other it is, I think, certainly from my seat looking at over 800 condominium corporations, it’s unprecedented.
And I’ll say that again, it’s unprecedented. The leadership that you have, the community that supports you is, by far, I think one of the most engaged and one of the most successful that I’ve seen from where I sit, and I wanted to share that with everyone and I wanted to congratulate the board, the staff, and certainly the management team that we’ve put in place there on so many successes. It is, again I use that word and I don’t use it very often, unprecedented.”
Crossbridge Condominium Services Ltd., the biggest property management firm in Canada, with a portfolio of now over 800 condos.
I am really proud of this because my team and I work exceptionally hard to ensure that Palace Place remains the best managed condominium residence in Ontario.
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Palace Place, 1 Palace Pier Court, and Palace Pier, 2045 Lake Shore Boulevard West, in Humber Bay Shores.
