Tag Archives: Altus Group

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Affordability Is A Challenge

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Affordability Is A Challenge

Housing supply is not rising in response to increased demand

Every fall, BILD invites experts on economics and housing to join us for breakfast and speak to our members about what the GTA housing market will look like in the coming year. This fall was no exception and I was heartened by much of what I heard about current and future trends from Patricia Arsenault of Altus Group and Dana Senagama of the Canada Mortgage and Housing Corporation (CMHC). I also saw we have much left to do around housing supply and affordability in our region.

There’s no doubt we have a lot to look forward to in the GTA. Economic conditions are expected to be solid in the short term, with the employment growth rate projected to be 1.8 per cent in 2019, according to Arsenault, who is Altus Group’s executive vice president, data solutions.

More GTA households than last year are planning renovations of over $5,000 in the next year, and the percentage of GTA households that currently rent but plan to buy a home in the next year has rebounded after softening last summer, according to Altus Group’s survey.

But these survey results only indicate what homeowners and potential new homebuyers intend to do, not what they are ultimately able to do, and Arsenault noted that households may take longer to save for that first home in the face of new mortgage hurdles and housing affordability challenges. The prices of condo apartments, which used to offer potential homebuyers a more affordable choice than single-family homes, have been rising, reducing the advantage of this option. In September, the benchmark price of new condo apartments was $789,643 and the benchmark price of new single-family homes at $1,119,533.

Despite rapid price gains in both ownership and rental markets, the supply response has been weak or inelastic, said Senagama, who is CMHC’s manager of market analysis. That means our housing supply is not rising in response to increased demand for housing and the corresponding increase in the prices of homes, as the law of supply and demand would lead us to expect. In fact, Senagama showed that Toronto is one of the markets in Canada that are not at the risk of overbuilding.

I was not surprised to hear this. BILD has consistently delivered the same message. We have said that we are not building enough housing to accommodate the 115,000 new residents who are arriving in our region every year. We should be building 50,000 homes every year, and last year we only built 38,000. A big reason for this supply shortfall is the lengthy development process that housing projects face in the GTA, slowed down by outdated regulation and red tape.

We should be updating zoning bylaws and official plans and streamlining the list of conditions for municipal approvals, so that we can build the housing our growing region needs. Only then will potential homebuyers be able to afford to make their dream of owning a home a reality.

Dave Wilkes is president and CEO of BILD (Building Industry and Land Development Association), and can be found on: Twitter.com/BILDGTA) Facebook.com/BILDGTA YouTube.com/BILDGTA and BILD’s official online blog: BILDBlogs.ca

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Don’t Doubt The Market

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Don’t Doubt The Market

There is no shortage of demand at the launches of new projects

The GTA housing market is as robust as ever and things have been humming along quite nicely for many years now.

And yet there will always be those who believe we are doomed, that the good times cannot continue for the GTA’s hot housing market — that it’s no doubt headed for an inevitable crash.

Well, that’s just not the sentiment we’re seeing at In2ition Realty as we’ve launched a series of successful projects across the region in recent weeks.

There was certainly no shortage of demand at the launch this summer of the first tower at Universal City, a Chestnut Hill Developments master-planned community in Pickering. The project enjoys lake views and is located just minutes from the GO Transit station. It sold out in record time and a second tower of 324 units just launched last month. The interest for tower two was equally as strong.

In Port Credit, on the other side of the GTA, it was the same story with the recent launch of Tanu Condos, a 204-unit tower and townhouse project by Edenshaw Developments. We had a lineup on the first day of launch!

Truth be told, Toronto condo builders can’t launch developments quickly enough to satisfy the insatiable demand.

It wasn’t all smooth sailing for the GTA housing market in 2018, mind you. The introduction of a new stress test on mortgage applicants certainly had an impact on home sales, sidelining some buyers.

And the GTA housing market faces considerable ongoing challenges, including trade labour shortages, development approval process and timing, project cost escalation, ability to secure financing, profit margins, land availability and cost … there are tons of hurdles for the building industry to contend with.

Although sales figures are down 40 per cent from last year, a portion is from lack of supply. In 2017 we saw 128 launches in highrise condos versus 56 in 2018.

The Toronto Real Estate Board (TREB) reported a 6 per cent uptick in regional home sales in October 2018, compared to the same month a year earlier. And the average sale price of a detached home in the GTA last month was up 3.5 per cent on a year-overyear basis, to $807,340. The average sale price for a condo in Toronto was $603,153, compared to $461,013 in the 905.

Renovation spending is also at an all-time high: $12.3 billion was spent on home alterations and improvements in Ontario in the first half of 2018, according to Altus Group.

Homebuying intentions are up, as well, despite affordability and qualifying challenges. An Altus Group survey of current homeowners and current renters showed that most GTA households are saying yes, they plan to buy a home in the next year or so.

The evidence doesn’t lie. Households and investors alike see the GTA housing market as a quality long-term investment. And why shouldn’t they? A thriving and diverse regional economy and a steady stream of 100,000-plus new arrivals in the GTA each year — more migration than any other city in Canada — will keep this market strong for years to come.

Debbie Cosic, CEO and founder of In2ition Realty, has worked in all facets of the real estate industry for over 25 years.

In2ition.ca

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THE INDUSTRY INSIDER: Affordability is a challenge

Affordability is a challenge: The prices of condos have been rising

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Affordability is a challenge: The prices of condos have been rising

The prices of condos, which used to offer homebuyers a more affordable choice, have been rising, reducing the advantage of this option.

Every fall, BILD invites experts on economics and housing to join us for breakfast and speak to our members about what the GTA housing market will look like in the coming year. This fall was no exception and I was heartened by much of what I heard about current and future trends from Patricia Arsenault of Altus Group and Dana Senagama of the Canada Mortgage and Housing Corporation (CMHC). I also saw we have much left to do around housing supply and affordability in our region.

There’s no doubt we have a lot to look forward to in the GTA. Economic conditions are expected to be solid in the short term, with the employment growth rate projected to be 1.8 per cent in 2019, according to Arsenault, who is Altus Group’s executive vice president, data solutions. More GTA households than last year are planning renovations of over $5,000 in the next year, and the percentage of GTA households that currently rent but plan to buy a home in the next year has rebounded after softening last summer, according to Altus Group’s survey.

But these survey results only indicate what homeowners and potential new homebuyers intend to do, not what they are ultimately able to do, and Arsenault noted that households may take longer to save for that first home in the face of new mortgage hurdles and housing affordability challenges. The prices of condo apartments, which used to offer potential homebuyers a more affordable choice than single-family homes, have been rising, reducing the advantage of this option. In September, the benchmark price of new condo apartments was $789,643 and the benchmark price of new single-family homes at $1,119,533.

Despite rapid price gains in both ownership and rental markets, the supply response has been weak or inelastic, said Senagama, who is CMHC’s manager of market analysis. That means our housing supply is not rising in response to increased demand for housing and the corresponding increase in the prices of homes, as the law of supply and demand would lead us to expect. In fact, Senagama showed that Toronto is one of the markets in Canada that are not at the risk of overbuilding.

I was not surprised to hear this. BILD has consistently delivered the same message. We have said that we are not building enough housing to accommodate the 115,000 new residents who are arriving in our region every year. We should be building 50,000 homes every year, and last year we only built 38,000. A big reason for this supply shortfall is the lengthy development process that housing projects face in the GTA, slowed down by outdated regulation and red tape.

We should be updating zoning bylaws and official plans and streamlining the list of conditions for municipal approvals, so that we can build the housing our growing region needs. Only then will potential homebuyers be able to afford to make their dream of owning a home a reality.

David Wilkes is president and CEO of BILD.

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Condominium Cancellations: Why All The Fuss?

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Condominium Cancellations: Why All The Fuss?

There has been much talk in the press this year regarding some high-profile condominium cancellations. One of the most high profile of the cancellations was the 1,200-suite three-building project Cosmo by Liberty Developments, which left purchasers scrambling to find equivalent units in the current marketplace. Overall, for 2017 until June 30, 2018, Altus Group reports 17 projects were cancelled for a total of 3,627 units.

The reality is that over the last seven years, an average of 17 per cent of proposed units have been cancelled for a variety of reasons. The number of units cancelled this year is in line with the average.

In the past, however, most of the projects that have been cancelled due to their uneconomic viability resulting in a lack of financing, a lack of sales or delays in municipal approvals. It should be noted that builders are extremely limited under the current Tarion regimen and have few termination rights (other than purchaser default). These include: (1) lack of specified government approvals; (2) lack of a specified number of presales; (3) unavailability of satisfactory financing; and (4) failure of the purchaser to provide evidence of finance ability. All need a specific outside date to satisfy the applicable condition which simply cannot be later than the outside date under the Tarion rules, as selected by the builder.

Many of the more recent cancellations are not due to lack of sales, but rather a lack of financing and the underlying reasons are usually delays in municipal approvals and escalating costs as a result of these delays.

The public and the press have speculated that the real reason behind these cancellations is so that the builder can resell these units at current and significantly higher prices. The actual reality is far from this conjecture.

The last thing that builders want to do is cancel a project. It reflects on their credibility and reputation both with purchasers, trades and Tarion. Projects are only cancelled within the limited termination rights that builders have under the purchase agreement and only as a last resort. The cost of cancelling a project can be significant in terms of lost marketing fees, real estate commissions and the additional carrying cost of the lands.

One of the real culprits in these unfortunate cancellations is the ever growing red tape and delays in obtaining government approvals. These can include anything from actual rezoning and official plan amendments, site plan approvals and signoffs by various departments to permit the issuance of building permits. As a result of these delays, carrying costs mount, construction costs continue to escalate while the developer is prevented from signing up his construction contracts without having a firm construction start date. And to add salt to the wound, the municipality itself creates extra costs by raising its development charges, park levies, planning fees and building permit fees while the builder waits for his approvals to come through.

The most recent example of this was the significant increase on November 1, 2018, of Toronto development charges on all projects. Avoiding the increase requires payment only when full building permits have been issued. Numerous projects had completed their submissions and were awaiting their building permits, which, in many cases, were delayed by the city beyond November 1, 2018. This alone has resulted in significant increases in DCs that may or may not be passed on to the purchaser. At the end of the day, every development needs to make a reasonable return. Banks will simply not finance projects where this return is not evident and, without bank financing, the projects simply cannot be built. The provincial government has recently asked for input from Tarion and the residential building industry as to the causes of the condominium cancellations and what can be done to best protect purchasers from the unfortunate results of a condominium cancellation.

The reality is that purchasers buy into projects at a very early stage, many even before full approvals are available, on the basis that they are getting in at the ground floor at a lower price. The downside of getting in early is that there is a higher risk of a project cancellation if the approvals do not come through or costs change materially such that financing is not available. Those purchasers that do not want to be exposed to those risks can simply wait to purchase a project at a later stage of the development, i.e. when approvals are in place, or when construction has commenced, or even when construction has been substantially completed so that they can plan their move-in timeframe.

There are certainly other tweaks that can be made to the process to ensure transparency and fairness. Payment of some interest to purchasers on deposits above the currently low statutory rate, and disclosure to Tarion of the underlying economic reasons as to the lack of financing by an independent cost consultant, could be considered.

At the end of the day, the real key in this environment is to properly educate consumers as to the risks of buying projects from plans. The problem with most new condo buyers is that they do not read the documentation or pay their lawyers to do so, other than the price and the adjustment clause. The solution is really to educate consumers as to these risks, no different from the risks of investing in the stock market or mortgages, or any other type of purchase or investment. Consumers need to go in with their eyes open.

Leor Margulies is a partner at Robins Appleby LLP.

https://www.robinsappleby.com/

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INDUSTRY EXPERT: Stress Buster

Stress Buster: Avoid needless home improvement stress with these simple steps

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Stress Buster: Avoid needless home improvement stress with these simple steps

Regular communication between you and your renovator is essential and may avoid problems.

Canadians love their homes. So much so that homeowners spent nearly $73 billion in 2017 on renovations, according to the Altus Group. That’s $20 billion more than is spent annually on building new homes across the country.

Unfortunately, everyone has a horror story about a home renovation gone wrong, from losing their deposit, spending more than you anticipated, or a project that took too long to finish. The reality is that the average homeowner doesn’t know all they should know when undertaking a renovation project.

Photography: Bigstock.com
Photography: Bigstock.com

To avoid disappointment and to set you on a path toward a successful renovation, RenoMark has come up with five steps to a worry-free renovation.

  1. Define your project. The more you know what you want out of the renovation, the more accurately the renovators can help you achieve that goal.
  2. Set your budget and expectations on the same path, if they are not realistic or in alignment, then you will be disappointed before you even start.
  3. Select the right renovator, you should look to reputable organizations such as RenoMark as a source of professional companies. Plus, these companies must adhere to the RenoMark code of conduct and the Association’s code of ethics, this alone means that they are a professional and not a fly-by-night company.
  4. Sign a contract. The contract should be reviewed by a lawyer and it will be the basis of understanding for the work moving forward. At a minimum, it should include costs, payment schedule, construction timeline, product-specific details, a communication protocol, warrantee clause, and a close-out plan. Avoid renovators who offer to do work without a contract in an attempt to avoid paying the HST. This type of renovator may also not be paying worker’s compensation or carry adequate insurance, leaving you at financial risk.
  5. Check on Progress. Regular communication between you and your renovator is essential and may avoid problems. During the course of a renovation, it is common for the homeowners to request changes or ask for additional work. These requests may affect the cost and time it takes to complete your project. It is important that you have a signed change order for all changes. Finally, remember to ask questions. The last thing anybody wants is to make an assumption or a guess that may lead to an error and then disappointment.

RenoMark.ca is a great resource to help you find the right renovator. RenoMark was established by the GTA-based Building Industry and Land Development Association (BILD) to identify professional contractors that have agreed to abide by a renovation-specific Code of Conduct. The RenoMark program has been endorsed by the Canadian Home Builders’ Association and the Ontario Home Builders’ Association.

David Wilkes is president and CEO of the Building Industry and Land Development Association (BILD), the voice of the home building, land development and professional renovation industry in the GTA.

For the latest industry news and new home data, follow BILD on Twitter, Facebook, BILD’s official blog, and bildgta.ca.


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Townhomes

Pent-up demand for townhomes building in the GTA

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Pent-up demand for townhomes building in the GTA

Townhomes

Condos may be the choice for many in the increasingly expensive GTA, but not everyone wants to live in a box in the sky. More and more new home buyers are looking for affordable lowrise options such as townhomes. Emphasis on the word affordable.

The problem? The supply just isn’t there – and the pent-up demand is growing.

Appealing especially to young families, townhomes provide more space and flexibility than condos, and generally are far more affordable than single-family homes.

“Both stacked (townhomes) and (row) townhouses form a key component of the Missing Middle – the built forms between high-density condo and low-density single-family housing,” Matthew Boukall, vice-president, product management, Data Solutions at Altus Group, told Homes Publishing.

Altus recently studied the sector for one of its regular housing reports, surmising that townhomes play an increasingly important role in in the new home sector, not just in the GTA but across Canada.

In the GTA, new townhouse sales have plummeted in the past two years – both in absolute terms and as a percentage of total new home sales (to just seven per cent of the total in the first half of 2018), Altus says.

GTA Starts

Affordability and availability remain an issue.

In the GTA, the key challenge to supplying this built form has been finding land with the right entitlements to allow and support this construction, Altus reports. Much of the land along Toronto streets support higher density condo product or is priced at a level which encourages rezoning to support this density.

“What can support more townhouse development is allowing rezoning of the land between the existing single-family communities and the corridors for more mid-density development,” Boukall says.

Although townhouse land (medium density) sales in 2017 were actually up over 2016, they are trending lower in 2018. Part of the problem is a lengthy approval process. “Year to date in Toronto, we have only tracked five approved townhouse projects, representing less than 350 units,” says Boukall. “Obviously, we need more product to meet the market demand. The positive note is that developers are proposing more product, with almost 1,500 new units applied for in 2018.”

GTA Townhouse sales

STACKED TOWNHOMES

Stacked townhouses, in which one row of townhouse units is stacked on top of another, provide a more affordable option to single-family homes, given higher densities. They also offer many of the appealing aspects of condominiums, but without living in a highrise environment.

However, they still play a relatively smaller role than traditional townhouses in the overall townhouse arena, Altus says.

In the Vancouver market, for example, new stacked townhouse units accounted for slightly more than 200 sales on average per year in 2015-17 – about six per cent of all new townhouse sales.

GTA Stacked

In the GTA, where stacked townhouses have made a larger dent, they remain a niche segment, accounting for about one in five new townhouse sales in recent years.

Part of the challenge with stacked townhouses versus rowhomes are those similar to condominium apartments – longer planning and construction timelines, and other residences adjacent on all sides

Both housing types will play an important role throughout the GTA in the future, but stacked townhouses are expected to become more popular given the better affordability provided by the higher density housing type.

“That said,” Boukall adds, “traditional row townhouses are the more common housing type in the GTA and as such, account for more sales compared to the stacked townhouse product. Row townhouse product has been accounting for a growing share of the single-family new homes sales in the GTA, currently accounting for 42 per cent of the total single-family sales activity in the GTA.”

WHERE IN THE GTA?

So, prospective GTA new home buyers, which areas hold the most promise in terms of future townhome availability?

While townhouses are expected to remain a popular housing option throughout the GTA, both Toronto and the York region share the most medium density land activity in the region, and should see increased development activity as a result in 2019 and beyond.

“The Peel region, most notably Brampton, is the most active for stacked and row townhouse sales in 2018 and should continue to see demand supported by an available land supply and comparably affordable prices,” says Boukall.

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7 factors that will affect GTA housing in 2019 – and 5 reasons to consider buying NOW

 

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Condo TO web

GTA condo sales and prices hit record levels

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GTA condo sales and prices hit record levels

Condo TO web

With home prices seemingly forever on the rise, there is only one way for many GTA homebuyers to go – up, as in into highrise condos and other multi-family housing options.

Fueled largely by affordability – and the lack thereof in lowrise homes – resale condominium apartments and townhomes in the GTA now represents almost 37 per cent of total residential sales by the Toronto Real Estate Board (TREB), up from 30 per cent in 2013, according to a new report by ReMax of Ontario-Atlantic Canada Region.

ReMax report

Momentum has also been reflected in resale condominium values, which is the only property segment that held up against the 2017 market correction, ReMax says.

The average price of a condominium unit increased almost eight per cent to $551,761 between January and October 2018, up from $512,552 during the same period in 2017.

Townhomes were slightly ahead of last year’s pace, with values hovering at $571,058, compared to $568,165 in 2017. Prices of freehold properties, including single-detached, semi-detached, attached/row/townhouse and linked townhomes are all down year-over-year.

AFFORDABILITY KEY ATTRACTION

“The condominium lifestyle continues to resonate with buyers in the Greater Toronto Area for a number of reasons,” says Christopher Alexander, executive vice-president and regional director, ReMax of Ontario-Atlantic Canada Region. “While the affordability aspect is first and foremost, we’ve also a seen strong investor presence in recent years.”

Alexander cites a recent report by Urbanation and CIBC, which found that investors who bought condominiums for the purpose of renting accounted for 48 per cent of all newly completed units in the GTA in 2017. “The income potential, given today’s tight rental market, in addition to the overall return on investment, has been a serious draw for real estate investors.”

Immigration, population growth and lifestyle choices have also contributed to the uptick in demand for condo apartments and townhomes. Aging infrastructure, combined with a lack of transportation alternatives, longer commute times and the environmental component – with efforts to reduce carbon footprint – have all played a role in buyers choosing condominiums in Toronto proper that are close to both work and play, Alexander says.

DOWNTOWN THE CHOICE LOCATION

The most popular area for condominium sales remains the downtown core, with one in every five condominiums (21.9 per cent) sold in the area bordered by Bloor Street to the north, the lakeshore to the south, the Don Valley Parkway to the east and just past Dovercourt Road in the west.

“In spite of a proliferation of condominium developments over the past decade, supply and demand issues continue to persist in the core,” says Alexander. “Limited inventory continues to place substantial upward pressure on prices, with fewer affordable housing options available– and that includes condominium rentals.”

Average resale prices hover at $700,000 for condo units, with new construction closing in on $1,000 per sq. ft.

PROXIMITY TO TRANSIT

“Higher prices in the core are prompting buyers to consider condominium communities farther afield,” says Alexander. “New construction along subway lines to the north, east and west are exceptionally popular, especially with first-time buyers. Yonge Street north of Hwy. 401 comes to mind, as well as the Sheppard line between Bayview Avenue and Leslie Street. Combined, these two areas represent approximately 10 per cent of total resale condominium sales to date and continue to experience growth.”

Mississauga is the GTA’s second most popular destination for condominium living, accounting for 14 per cent of condominium sales so far this year.

Almost 51 per cent of condominium sales in the GTA occur under the $500,000 price point, but affordability is being threatened as builders and developers face skyrocketing construction costs and a land crunch within the GTA, and struggle to maintain the status quo, ReMax says.

“The necessity to ‘build up’ has never been more prevalent in a city that has seen its population climb from one census to the next,” says Alexander. “To prevent the run-up we’ve seen in housing values in the past, all levels of government must work together with developers to streamline the building process. We need to create more affordable GTA housing options that can accommodate buyers and renters at every price point.”

THE TOWNHOME OPTION

These trends generally align with the findings of another report, from Altus Group. Lack of affordability and availability of single-family new homes has buyers increasingly looking to townhomes as a lowrise home option. But supply issues in this category have seen new townhouse sales plummet in the past two years, in both absolute terms and as a percentage of total new home sales – just seven per cent of the total in the first half of 2018.

RELATED READING

New condos in Toronto hit record high in prices

Vast majority of GTA Millennials fear buying a home is out of reach, poll says

7 factors that will affect GTA housing in 2019 – and 5 reasons to consider buying NOW

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Government should develop a better plan for Development Charges

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Government should develop a better plan for Development Charges

We read and hear a lot of criticism in the media and from the general public aimed at builders and developers, complaining about the rising prices of new homes and condominiums in Toronto and the Greater Toronto Area. Blaming builders and developers alone is unfair. Our governments that control development charges must accept a big chunk of the responsibility for current housing prices.

In May of this year, Altus Group conducted a study for BILD entitled “Government Charges and Fees on New Homes in the Greater Toronto Area” and found that the average government charges for a new single detached home add up to $186,300, which is 21.7 per cent of the price. Think about it: 21.7 per cent of the price! Development charges for the average highrise apartment in the GTA amount to approximately $122,800, or 23.9 per cent of the average price. No wonder so many people are priced out of the market.

Of course, land prices have soared over the past while, and the costs of everything from trade labour to suppliers, materials, administration, engineering, architecture, advertising, public relations and the numerous other services necessary to bring new home communities to market have jumped as well. Add to that the fact that once a developer purchases a piece of land, it can, and usually does, take years to obtain all of the approvals in order to build on it, and you can see why offering new homes and condos at affordable prices is a challenge. Throughout those years, ongoing rising costs push up home prices even further.

Having said all of that, development charges are necessary. Municipalities levy these amounts on new developments to help cover the capital costs of increasing each area’s infrastructure and services. These include sewers, roads, water, local amenities, emergency services, etc., that benefit everyone. It is one thing to say that new home buyers should pay their fair share; it is quite another to say that the development charges that have increased between 236 to 878 per cent since 2004 are “fair.” Over that same period, average wage increases and inflation have not gone up anywhere near that much.

Remember that every year, the building and development industry creates thousands of jobs and contributes billions of dollars to our local, provincial and national economy. According to BILD, every construction crane you see across the GTA represents up to 500 new jobs in construction and related fields.

Before you blame only builders and developers, take a good look at your municipal government and how it collects and allocates funding through development charges. If you think it is unfair, speak up. You elect your municipal politicians, and they should work for you, not against you. Ask candidates what they might do to fix this unfair situation. And before you play the blame game with builders and developers, do some research and look at home prices in the proper context.

BARBARA LAWLOR is president and CEO of Baker Real Estate Incorporated, winner of the pinnacle 2017 Riley Brethour Award from BILD, and an in-demand columnist and speaker. A member of the Baker team since 1993, she oversees the marketing and sales of condominium developments in the GTA and overseas. Keep current with The Baker Blog at blog.bakerrealestate.com

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Toronto Oct 25 18

GTA new home market shows some improvement in September

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GTA new home market shows some improvement in September

Toronto Oct 25 18

The GTA new home market saw increases in September over the previous month, both in terms of new project openings and new home sales, particularly sales of condominiums, according to the Building Industry and Land Development Association (BILD).

There were 1,747 new homes sold in September, according to Altus Group, BILD’s official source for new-home market intelligence – a sizeable increase over August’s 974 new home sales. Condominiums in low-, medium- and highrise buildings, stacked townhouses and loft units accounted for 1,494 new home sales in September, down 20 per cent from September 2017 and down 20 per cent from the 10-year average. Single-family home sales, with 253 detached, linked and semi-detached houses and townhouses (excluding stacked townhouses) sold, were down 28 per cent from last September and down 77 per cent from the 10-year average.

MORE PROJECT OPENINGS

With 10 condominium apartment projects and seven single-family home projects opening in September – a significant increase from August’s two project openings – remaining inventory increased to 13,952 units, comprised of 8,820 condo apartment units and 5,132 single-family units. Remaining inventory includes units in preconstruction projects, in projects currently under construction, and in completed buildings.

“It appears more buyers – and builders – are starting to come in from the sidelines,” says Patricia Arsenault, Altus Group’s executive vice-president, Data Solutions. “The increase from August in both new condominium apartment sales and the number of units in new projects launched was somewhat stronger than the typical September bump alone would suggest.”

NEW HOME SUPPLY

David Wilkes, BILD president and CEO, says it’s all welcome news, but points out that consumers still lack a range of options in the new home market, due to lack of supply. The 8,820 units remaining in the condo apartment inventory represent about five months’ worth of inventory, based on the pace of sales in the past 12 months. A healthy new home market should have nine to 12 months’ worth of inventory.

This shortfall in the supply of condominiums partly accounts for the closing gap between the prices of condos and single-family homes in the GTA. In September, the benchmark price for condo apartments rose again, to $789,643, up 19.4 per cent over the last 12 months. The benchmark price for single-family homes softened again to $1.12 million, down 7.1 per cent over the last 12 months.

MUNICIPAL PARTNERS

“In the lead-up to the municipal elections, BILD succeeded in raising housing supply and affordability as major election issues,” says Wilkes. “Now we look forward to working with our municipal partners to address the barriers that stand in the way of building the housing our region needs to accommodate growth. Some straightforward steps include making sure that government charges on new homes are fair, funding and building critical infrastructure, cutting red tape and speeding up building permits and inspections.”

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Understanding Development Charges

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Understanding Development Charges

The purchase price of a new home is comprised of many components – a significant portion of which is a tax referred to as Development Charges (DCs).

According to recent Altus Group statistics prepared for the Building Industry and Land Development Association (BILD), Development Charges account for more than 20 per cent of new home prices in the GTA. The average new single-family home includes about $186,000 in DCs. These are one-time fees imposed by municipalities on land developers, homebuilders and institutions when they build within their boundaries.

The idea behind these fees is to help defray the costs to provide the additional infrastructure that is or will be needed to accommodate the increase in population from the new developments.

People typically think of infrastructure as roads and sewers, but Development Charges also go toward a variety of amenities that benefit entire communities.

Development Charges are protected by legislation. In 2016, Bill 73, the Smart Growth for Our Communities Act, came into effect to help ensure predictability and accountability of municipalities, help them fund growth, protect greenspaces and ease the planning/appeals process. These steps were taken to improve on the Development Charges Act that was implemented in Ontario in 1989.

Municipalities conduct studies to determine what services and infrastructure will be required in the future to accommodate growth. Through the mechanism of a bylaw, they have the ability to determine fees that can be used to pay for hard and/or soft services. Hard services include items such as roads, water and waste management. Examples of soft services are libraries, parks and recreation centres. A simple way to think of this system is that growth pays for growth.

The Neighbourhoods of Cardinal Point in Whitchurch-Stouffville.

A good example of how Development Charges are applied is in the growing Midhurst area in the Township of Springwater, Simcoe County, where Geranium has land holdings in the Doran Road and Carson Road communities. The DCs on new homes built here will help with the creation of a comprehensive new parks and recreation master plan offering an exciting array of facilities and amenities. These will include neighbourhood parks, ball diamonds, splash pads, trails, tennis courts, picnic pavilions, a multi-purpose recreation centre with a twin-pad arena, curling rink, community centres and potentially more. In addition, these funds will pave the way for expansion on critical services such as fire and police protection. When delivered, these substantial amenities will result in a higher quality of life for residents of the area, whether current or future.

Municipalities experiencing growth have a limited number of tools at their disposal to raise funds to support the aforementioned hard and soft services. Voters do not like it when their political representatives raise property taxes, so development charges often bear the brunt of costs associated with growth. This explains why they account for 20 per cent of the price of a home in the GTA.

Families buying a new home are often drawn to it because of the surrounding neighbourhood and the opportunities to enjoy parks and trails, recreation facilities and community centres. These amenities are provided, repaired and maintained partly as the result of Development Charges.

Shauna Dudding is senior vice-president, development for Geranium. Since 1977, the company has built more than 8,000 homes throughout Ontario. Geranium.com

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