Person of the Year 2017:
Canada’s Home Builder
Despite government disruptions home builders delivered 200,000 new homes and more than one million jobs in 2017
By Frank O’Brien
Despite headwinds, residential building permits were running at a near-record pace of nearly $5 billion a month in late 2017. - Photo: North American Services Centre
Canada’s home builders battled concentrated—and often misguided—government attempts to disrupt housing demand and supply to deliver the highest housing starts in nearly six decades in 2017. And they created more than one million jobs in the process.
Canada’s largest housing markets—Greater Toronto and Metro Vancouver—were the focus of unprecedented disruption as all levels of government threw up barriers for homebuyers and builders. Yet as the year ended both markets were thriving and new home construction levels were setting fresh records.
Last spring, following the lead of British Columbia, the Ontario government launched a 16-prong attack on housing demand and supply in an effort to cool a white-hot housing market. Among other measures it introduced a foreign-home buyer tax, tightened rental controls, introduced an empty home tax and made it harder to achieve zoning for detached houses.
In Vancouver a new zero-emissions bylaw forced all new homebuyers to incorporate energy-saving measures that added tens of thousands of dollars to new homes that are already the most expensive in the country. A province-wide BC Energy Step Code, introduced in April 2017, will add from $40,000 to $80,000 to the cost of a new house, according to Casey Edge, executive director of the Victoria Residential Builders Association.
In Winnipeg, and other urban centres, municipalities increased taxes on new home developments. In the Manitoba capital, a new fee added a $5.09 per square foot fee on every new home permit.
“On an average new house, this increases the construction cost to a homeowner by about $10,000 to $15,000,” said Lanny McInnis, president of the Manitoba Home Builders’ Association.
The federal government, meanwhile, raised interest rates by 50 basis points and introduced new lending regulations that made it harder for homebuyers across Canada to even qualify for a mortgage.
The result of all this political meddling: Canada’s housing starts eclipsed 200,000, the inventory of new and unsold homes hit the lowest level in more than six years and housing prices reached record levels, according to Canada Mortgage and Housing Corp.
New construction, renovation and repair accounted for more than one million jobs in 2017, making the industry one of the country’s largest employers. The investment value of all residential construction was exceeding $4.9 billion per month as of October, according to Statistics Canada building permits data.
In the Greater Toronto Area (GTA), the benchmark price of a new detached house surpassed $1.2 million, up 25 per cent from 2016, while the typical condo price increased 42 per cent to nearly $500,000, reported BILD president and CEO Bryan Tuckey in late 2017.
The reason for the new home performance is that government measures often ran counter to reality and consumer demand, analysts say.
The foreign-home buyer tax, for example, was largely ineffective because there are so few foreign homebuyers – less than 1 per cent of the Canadian housing market and no more than 3 per cent in the GTA according to the first detailed data from Statistics Canada.
It is the simple desire of new Canadians to own a home that is having a much more profound affect.
A report in the winter edition of the Canadian Journal of Urban Research showed that recent Chinese immigrants to Toronto and Vancouver have a home ownership rate of 73 per cent, much higher than in the general population. Across Canada, more than seven in 10 of those who arrived in Canada to become citizens between 2011 and 2016 now own their own home.
The report notes that Canada’s decision to raise permanent immigration levels from approximately 270,000 in 2015 to 340,000 in 2020 “will surely have a significant impact” on Canada’s new home sales.
As well, tighter federal controls on mortgage lending, meant to curb home buying, had the opposite effect as Canadians rushed to purchase in fear that even tougher restrictions were coming. The overall effect of the mortgage measures could also be muted due to the “creative borrowers and increased activity among alternative lenders” according to CIBC deputy chief economist Ben Tal. “Actual [mortgage demand] will slow by only 5 per cent to 7 per cent [in 2018],” he forecast.
Canada’s home building industry is thriving because it is a vital source of jobs, incomes and economic activity in every community across the country, noted Kevin Lee, CEO of the Canadian Home Builders’ Association.
It also delivers what Canadians desire: a quality home and an opportunity for financial security. During 2017, the average new house price increased by $20,400 from a year earlier and by twice to three times that amount in major cities.
As 2017 has shown, Canadian home builders are resilient, adaptive and capable of overcoming immense obstacles to assure Canadians remain among the best-housed in the world.
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