« Montreal mayor wants more tax | Main | Creatively structure your mortgage »
Warning of new home slowdown
High land prices, interest rates and material costs are eroding the affordability of new homes
Ontario's once red-hot home construction market will experience its second straight cool-down year in 2007, the president of the Ontario Home Builders' Association told an industry conference last week.
"I expect that in the coming year, while the housing market will still be healthy, we are in for a bit of a soft landing," Brian Johnston told the 19th Building and Renovation Forum at Markham's Hilton Suites Conference Centre.
Johnston said the anticipated drop in housing starts across Ontario this year is sparked in part by development land shortages, rising interest rates and the soaring cost of building materials.
"Every issue we deal with at OHBA can ultimately be linked back to housing affordability," Johnston added.
Although the new housing market is several years past its "cyclical peak" in 2003 and 2004, housing starts are still – and will remain – way ahead of historical averages, he said.
In his look ahead at what 2007 would hold for the industry, Johnston rolled out a number of predictions, including 69,000 building starts in Ontario. Starts last year hit 75,000.
Homeowners will also spend some $17 billion on Ontario's "robust" home renovation industry this year, Johnston predicted.
In the Toronto area, housing starts declined 11 per cent from 2005 to 2006, according to a Canada Mortgage and Housing Corp. report issued last week.
Last year, 37,080 new homes were started in the GTA, compared with 41,596 in 2005, the federal housing agency said. CMHC considers a home "started" when the foundation is poured.
The decrease was blamed on higher prices for entry-level homes such as single detached, semi-detached or row housing.
The province's Places to Grow document, which outlines growth plans for Greater Toronto and beyond, will also have a significant impact on the supply of affordable housing.
"The industry has concerns that dwindling land supplies and the resulting increases in land costs will be a significant barrier to efforts by the provincial government to implement the Places to Grow growth plan," Johnston told the forum.
A recent survey of OHBA builders showed 35 per cent worry about an ongoing supply of ready land to service the industry.
Almost 40 per cent of those surveyed said the biggest barriers to housing affordability in Ontario are high land costs and shrinking availability.
Central to ensuring that Greater Toronto remains livable is the ongoing expansion of its sewers, roads and public transit network, Johnston said.
"With almost four million people expected to settle in the Greater Golden Horseshoe by 2031, Ontario has to invest in infrastructure," he said. "To ensure a high quality of life along with a prosperous economy, the province must continue to significantly increase investments to expand and repair our existing infrastructure."
Greater Toronto's "poster child for a lack of timely planning" is York Region, which is experiencing a backlog of building applications resulting from slowdowns in the construction of several links to the Big Pipe sewer system.
"You can't decide overnight you are going to put one of these pipes through," Johnston said in an interview. "They didn't seem to leave enough time to deal with problems they encountered."
Community opposition to any expansion of Greater Toronto's aging electricity grid is also of great concern to builders, he added.
"As a government, you sometimes have to upset a few people to get things done," Johnston said. "That's just the way it is."
Johnston told the forum it is key that all levels of government streamline and fast-track the building process.
"Unfortunately, some provincial legislation designed to speed up and simplify the residential building process isn't working as it was intended and that's leading to frustration and costly delays," he said.
"Whether it's the dreaded Bill 124, overbearing conservation authorities or unco-operative municipal planning departments, these issues must be addressed so that all the policies and government initiatives impacting development and land-use planning are co-ordinated," Johnston added.
(Bill 124 is an amendment to the province's building code that was meant to streamline the process, among other things. The legislation kicked in Jan. 1, but many in the building industry warn the changes will lead to even more delays because many municipalities aren't adequately prepared.)
According to OHBA statistics, Ontario's construction industry employs more than 360,000 workers and is responsible for some $25 billion of the province's economy, or 5.4 per cent of its GDP.
About 62 per cent of Canadians own homes, up from 60 per cent over the last five years.
January 21, 2007 in Toronto Real Estate Update | Permalink
TrackBack
TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341c51e453ef00d834dc72e553ef
Listed below are links to weblogs that reference Warning of new home slowdown:
Comments
Hello,
would this apply to Toronto condo prices as well?
Posted by: Helen | Jan 23, 2007 12:58:26 AM
great blog!
Posted by: kkt | Jan 21, 2007 5:05:08 PM
The comments to this entry are closed.
