Are semis truly dead?  Or are they barely breathing?

Yesterday’s article shed a lot of light on the market for semi-detached houses, or more accurately – the market for developers to construct them in the first place.

Here are my thoughts shown through my own experiences in the industry…

The conversation would go something like this:

“Check out this lot – dilapidated bungalow and it’s got a 39-foot frontage.”

“Ooooh……thirty-nine feet?  Do you think we could squeeze in two semis?”

I used to work with a developer who was always looking for that squeeze-in.

Once upon a time, this developer’s father purchased what amounted to a laneway behind a few homes, and after a little palm-greasing and some zoning changes, he was able to construct eighteen townhouses on the land!

He was the king of thinking outside the box.

He could see what nobody else would ever see.

He could take a piece of land that nobody else wanted nor had any use for, and turn it into millions of dollars.

Sadly, he passed away just as I was getting into real estate, and I began to work with his son.

We didn’t have the foresight that he did, but we were always looking for infill lots where we could build semi-detached homes.

Why did we want to build semis?

One word: money.

The only reason that I can think of why a developer would ever build semi-detached homes instead of detached is the money in their pocket.

It goes without saying that a detached house will command more money than a semi-detached house of the exact same specifications.  If you were to look at a ‘typical’ 3-bedroom, 3-bathroom house with a finished basement on a 25 x 120 foot lot and it was semi-detached and selling for $650,000, you would likely see the exact same detached house across the street selling for $750,000.

Maybe it’s the greater fool theory.

Maybe the only reason why people will pay MORE for the exact same house if it’s detached is because they assume that it will be worth more down the road when they bring it to the resale market!

What are the advantages of the detached over the semi, really?

You don’t share a wall.  That’s about it.

Don’t tell me about the “noise” because I really don’t buy that excuse.  Unless Bon Jovi is playing in the living room next door, 99% of the time, you can’t hear a peep.

The only drawback comes from a future renovation standpoint, which is to say that you can’t really tear down one half of the semi, and it makes things complicated if you want to build out, up, or back.

Maybe you have a mutual driveway instead of a private drive, but that can be said of any detached-versus-detached.

I think we would all agree that detached houses are worth more than semi-detached houses, simply because they have previously been deemed to be worth more, and will continue to be worth more.  What a circular argument!

If you’ve seen any new semi-detached houses built in the last few years, chances are, they were built because the developer made more money that way.

Take a lot where there’s an old house up for sale and look at the frontage.  Let’s assume it’s fifty feet.

How much could you sell a brand-new, detached house for?  Maybe $1,500,000.

Now if you sub-divided that lot into two separate 25-foot lots, how much could you sell each semi-detached house for?  Maybe $950,000 each?

If it cost you an extra $175,000 in materials for the second house versus that of building one massive house, and $25,000 in legal expenses and soft costs as you go to the committee of adjustments, you’ve got an extra $200,000 in your pocket for building these two semi-detached houses instead of one detached house.

This situation is very common.  Look no further than the Bathurst/Lawrence and Avenue/Lawrence pockets where old bungalows were torn down and two semi-detached houses were built in their places.

Of course, there are areas where this idea would never fly.  I can’t imagine seeing a house in Leaside torn down and having two semis built in its place.

Yesterday’s article mentioned areas north of the city such as Peel Region or Markham where sub-divisions still make use of the semi style.  This is a completely different animal.  Where you have vacant land that was probably a farm ten years ago, you can plan out the entire “community” with a host of detached, semi-detached, and townhouses.

But in the central core, I don’t see any more semi-detached houses being built unless it’s because a developer is going to make more money that way.

Although some say this is a good thing, since semi-detached houses might not appreciate in value as much as detached houses.

Take my clients, Pete and Sarah, for example.

They were looking to buy in Leaside in 2008 and we were caught up in multiple offer after multiple offer.

This one time – we offered $636,000 on a house priced at $569,000, and the (censored) agent walked me to the door and told me his clients were “insulted” by my “terrible” offer, and that he was going to “let me go home now since there was no way I needed to wait by the phone for later.”

That house sold for almost $700,000, and it was far more than it ever could have been worth.

Another house on that street sold for $717,000 a week later, and all rational thought had been proved wrong.

Pete and Sarah got the deal of the century when they bought a bungalow for $589,000 on Spring Break when nobody else was around.

Fast-forward two years, and Pete & Sarah are moving to Australia and need to sell their bungalow.

They’ll likely get $720,000 in the September/October market – a nice tidy profit and about 22% appreciation per year.

And what of those over-priced semis?

I’m willing to bet that if the owner of the $717,000 semi were to list in September, he likely wouldn’t do much better than the $720,000 that Pete & Sarah are going to get for their house.  In fact, I might be willing to put down money that he won’t even crack $700,000.

Maybe the owner of the semi overpaid.

Maybe Pete & Sarah got the deal of the century.

But the numbers don’t lie – the big money was made on the detached house.

I guess in the end it could come down to preferences.  Who knows, maybe over time we’ll see a “rarity effect” put a premium on semis in certain areas.  Because as we move forward, they certainly aren’t making any more of them…