Trisha and Dennis Rawlings, a couple in their early 30s, are moving to suburban Chicago and leaving their over-60-year-old first home in the St. Louis area behind.
“We were looking at potentially buying a house,” Trisha says. But in the area where they want to live, the options within their budget were limited to purchasing an older home or building a new one.
The couple loved the features of a modern, new-construction neighbourhood with a pool, a clubhouse and excellent walkability. And taking out a construction loan and building a house means they’ll avoid the ongoing maintenance that comes with an older home.
With the supply of existing homes available to buy at “an all-time low ” nationwide, according to the National Association of Realtors, homebuyers like the Rawlingses and others _ including younger buyers _ are looking at other options that include building a house. Here’s how to get started if you decide to build a home.
FINDING A CONSTRUCTION LOAN
“It all starts with your ability to be financed and what kind of budget can you establish from there,” says Dan Moralez, regional vice-president for Northpointe Bank in Holland, Michigan. “You don’t want to be sold something by somebody and then the next thing you find out is that you don’t qualify.”
But not every mortgage banker or broker offers construction loans.
“Most mortgage people will go their whole career without ever doing one,” says Jerry Thomas, a mortgage loan officer in Farmington Hills, Michigan. “Another big group of (lenders) will do one and then swear they’ll never do another one again.”
There’s no easy way to find a construction lender. Ask for referrals from friends and family. Builders often have lenders they recommend.
LOCKING IN THE LAND
Getting a place to build a house is a major part of the homebuilding process.
“You don’t have to own the lot free and clear,” Moralez says. However, any equity you have in the land can be applied toward a down payment and closing costs.
Moralez says he has clients who want to “lock in a piece of dirt” so they can build on it in a year or so. Unfortunately, he says, the number of lenders who finance vacant land is significantly smaller than the number of lenders who will do a construction loan.
Buyers who are planning to finance the cost of the land and home construction simultaneously will need to keep this in mind when searching for a lender.
QUALIFYING AND THE DOWN PAYMENT
It’s harder to qualify for a construction loan than for a typical purchase mortgage, Moralez and Thomas say. That’s because the bank is taking extra risk during the building phase, since there isn’t an asset to secure the mortgage.
Typical down payments are around 10 per cent. Federal Housing Administration, Veterans Affairs and U.S. Department of Agriculture mortgage programs back construction loans and can allow some credit leniency, along with low _ or no _ down payments.
“If you can put 20 per cent down and you have a 720 credit score or better, you know you’re pretty much going to qualify for everybody’s program,” Thomas says.
USING A BUILDER OR DIY
There are two kinds of builders: custom builders and “production builders,” who construct a high volume of similar homes and work for maximum efficiency. If your house plan includes many special or unique features, look for a custom builder, since they specialize in building to meet client expectations, Moralez says.
Want to build your own home?
“More and more often, we’re saying no,” Moralez says. “Most lenders will not do a self-build project.” He says the few exceptions go to borrowers with relevant trade experience.
Moralez says borrowers who think they can save money contracting out the work themselves may be in for a disappointment. With the housing industry facing a shortage of skilled labour, you’ll likely pay more for workers than a high-volume contractor would.
Also, construction loans for a do-it-yourself project typically require higher credit scores and larger down payments. Terms and qualifications vary by lender.
STAYING WITHIN BUDGET
Cost overruns are the biggest danger you could face when building a home, Moralez says. A builder’s bid sets cost allowances for lighting fixtures, flooring, countertops and other major features. An upgrade here or there can bust the budget, and you’ll have to make up the difference in cash, he says.
Research the costs of the materials upfront to help avoid making significant and expensive modifications along the way.
Source: By Hal Bundrick – The Associated Press – 27 Feb 2018
When Karen Somerville and her husband Alan Greenberg showed up for the pre-delivery inspection of their brand new luxury home in Ottawa they were horrified. Electricians, drywallers, plumbers and a variety of other tradespeople were still busy constructing their home and, despite assurances from the builder, the couple seriously doubted their $443,000 new build would be ready for possession in 14 days. Electrical wires hung from ceilings and stuck out from unfinished walls, appliances and cabinets were stacked in the kitchen, and only a portion of the hardwood floors had been installed. They immediately hired an independent contractor to examine the home. The result was a deficiency report citing 130 problems, including an undersized furnace and ductwork, poor ventilation and improper roof installation.
At first, Karen, then a university professor, and her husband Alan, an account manager with Sun Microsystems, tried to negotiate with the builder to resolve the problems. When this proved futile, the couple turned to Tarion—the private corporation that regulates Ontario builders and provides warranties on new houses and condos. Tarion sent its own inspector who confirmed that there were 85 defects in the home—but only 39 were considered to be under warranty.
Karen and Alan would be on the hook to fix the other defects themselves, which would cost the 40-something couple $4,000 or more. “This is the largest purchase we, as consumers, make,” says Karen, “and Tarion is supposed to be there to help.” Instead, she found herself having to document and defend an appeal against the provincial warranty program’s decision—despite paying a $650 fee for her new home warranty.
Buying a new home directly from the builder, whether a condo, townhouse or detached, is a popular choice. Almost one third of all homes sold in Canada each year are brand new. In Ontario alone, more than 52,500 buyers opted for a new build last year, and a forecast by the Canada Mortgage and Housing Corporation (CMHC) predicts that number will only climb. Despite the problems Karen and Alan encountered, it’s easy to see the appeal: Buying direct from the builder means you can customize your dream home to your exact tastes. It means higher energy efficiency ratings than older homes, and often higher quality building materials. New homes also have lower maintenance costs and are less likely to surprise you with a serious issues such as a cracking or tilting foundation, severe plumbing problems, asbestos or knob-and-tube wiring that needs replacing.
But as Karen and Alan discovered, there are some pitfalls specific to a new home purchase too—pitfalls that we don’t want you to run into. To help out, we’ve compiled the top 10 mistakes that new home buyers make, so you can be sure to avoid them. Read on to find out why you should be wary of the show home, what to do if your new place isn’t ready on time, how to save big money on upgrades, and most importantly, how to make sure that the dream home you’re expecting is the one you actually end up getting.
Mistake #1: They fall in love with the show home
When Jason Saxon and his wife Emily set out to find a builder in the quaint Edmonton suburb of Spruce Grove, they were surprised to find only two builders operating in the area. “Only one of them offered the separate dining room that we wanted,” says Jason, which made their choice easy. The deal was clinched when they toured the builder’s magnificent show home. “It had everything we needed,” gushed the systems analyst. The couple (whose names have been changed to protect their privacy) was so impressed by the show home they booked an appointment with a salesperson on the spot. Within days they had a signed purchase agreement and were busily designing their dream home.
That, of course, is the result every builder is aiming for, explains Stan Garrison, an industry insider with more than 20 years experience (we’ve changed his name to protect his privacy). “Most people fall in love with the show home, but you have to realize that everything you see in that model home is an upgrade,” he says. “And upgrades are a major portion of a builder’s 10% to 20% profit margin.”
Upgrades are so profitable for the builder because the industry standard is to charge double the sub-trade’s fee—a cost that is passed directly to the buyer, Garrison says. “That means the $8,000 granite countertops you ordered really cost your builder $4,000. Now multiply that by 25 buyers and you can see how builders make a profit.”
That doesn’t mean you should never order an upgrade, but you do need to be clear on what is an upgrade and what isn’t—and do a little bargaining so you don’t get taken for a ride. “With new builds there is no room for negotiation on the base sale price,” explains Max Wynter, a realtor with Re/Max Realtron Brokerage in Markham, Ont. “But there is room to negotiate the price of your upgrades.”
The rule of thumb is the more upgrades you spring for, the bigger the discount you should angle for. “If you purchase $5,000 in upgrades the builder may only give you a 10% discount,” says Garrison. “But purchase $50,000 in upgrades and you can start asking for $10,000 to $15,000 off the final price.”
Mistake #2: They trust the floor plan
Ken Grunber, who works at a video production house in Toronto, found out too late that the new condo unit he bought in 2007 wasn’t nearly as large as advertised. When he and his partner moved in and measured the area, they discovered it wasn’t 700 square feet after all. The condo was actually 560 square feet—if you don’t count the balcony and bathroom.
“That’s not unusual,” says Martin Rumack, a real estate lawyer with over three decades experience in new build construction. “Condo sales staff will often include balcony or terrace measurements as part of the total square footage. New home sales staff will provide square footage based on measurements of external walls. You can’t rely on their verbal assurances, on the floor models, or on the sale pitch or brochure.”
Unfortunately, many new home decisions are based solely on brochures or artist renditions. For instance, a sales brochure sold the Saxons on upgrading to French doors for the entrance to their walkout patio. “We’d originally seen the sliding doors in the show home, but a brochure highlighted the double French doors and we loved the look,” says Jason. They quickly paid the upgrade fee, but when they moved in they were surprised to find the doors didn’t have the little window panes with wooden slats between them that they had seen in the photo. Instead there was just one huge pane of glass in each door. “The price quoted by the builder’s sales rep didn’t include window slats, just clear glass. It would cost us more to get slats,” Jason says. “Now I know: get every detail in writing.”
In fact, the builder has the discretion to change an image, or floor plan, or layout and “you have no say,” says Rumack. He suggests asking for a breakdown of room sizes and plan details, and to “get it in writing.” Then, if there’s a substantial difference between what you’re sold and what you get you can either negotiate a price reduction or try and get out of the deal.
Mistake #3: They don’t get their contract lawyered
Whether you’re buying a new detached home or a condo, the purchase agreement is the legally binding document that spells out what you’re getting and the conditions of the sale. It’s full of fine print and legal-speak, and if you sign without legal representation, you risk being bound to terms you don’t understand or don’t want. More importantly, says Rumack, it destroys any chance of re-negotiating the terms of the sale.
“Skip legal advice and you could end up with an electrical utility box on your front lawn that you can’t do anything about, or no side door on your garage, regardless of what the plans looked like,” he says. “You could find yourself stuck with any manner of substitutions, exclusions or inclusions that could detract from your home’s future value.”
When you’re buying a condo, depending on the province you live in, you may have a cooling off period of up to 10 days. This gives you a chance to pay $800 to $1,600 and hire a lawyer to go through your contract after it’s signed. If you don’t like what they find, you can back out of the deal.
Unfortunately, there’s no such period for freehold homes, and many home builders demand that you sign a contract on the spot to secure your sale price or lot selection. Try to avoid this situation if possible, but if you must, at the very least insist on adding a clause that makes the deal conditional upon approval by your solicitor. “These days more and more builders are offering buyers a two-day period where they can seek legal advice before the contract becomes binding,” explains real estate lawyer Sheldon Silverman.
Mistake #4: They don’t bother with an inspection
During the home buying process there are two specific times when it’s important to have your house inspected. The first is the pre-delivery inspection, a mandatory walk-through for all new homes under warranty. This inspection takes place with your builder shortly before you officially take possession of your home. The second inspection should be scheduled for about one month before your home warranty expires. In Ontario the first and broadest portion of your warranty expires 12 months after your possession date, in B.C. it’s 24 months after possession.
During the pre-delivery inspection, you probably don’t need to pay for a professional inspector, but you might want to “take along a friend who’s wise about construction,” says Silverman, “because if you don’t write down the deficiency then the builder isn’t obligated to fix the problem.”
However, hiring a professional home inspector to do a second walkthrough before your warranty expires is a must. This will allow your home to go through all four seasons, which is enough time for major defects to start showing up, and you’ll still be able to get them fixed under the first stage of the standard provincial warranty, which covers against material and labour defects.
Mistake #5: They accept delays without a fight
Believe it or not, until quite recently, if your new house wasn’t ready on time, it was your problem. “Builders were not required to provide reasons or to limit their delays,” says Rumack. But that all changed when Toronto condo buyer Keith Markey challenged a Tarion decision five years ago.
In 2001, Markey bought a unit in a soon-to-be constructed condominium tower in downtown Toronto. His initial possession date was Nov. 30, 2002. But as the date approached, the builders kept sending letters announcing delays. Markey’s possession date was moved back six different times—he wasn’t able to move in until eight full months after the initial possession date.
He requested $5,000 from the builder to compensate him for the delays. The builder refused, the case went before a tribunal, and Markey won. Tarion appealed the case, but in 2006, Markey was vindicated: Not only did he receive almost $5,000 in compensation but close to $9,000 in damages. The case changed how Tarion and other provincial warranty programs handle builder delays.
“The law is now clear and critical dates are now included as part of the purchase agreement and contract,” says Silverman. “If a builder misses these critical dates and requires an extension, a buyer can either agree, and seek compensation, or simply get out of the deal.” Either way, Silverman suggests seeking legal advice whenever you’re presented with a request to delay a critical date.
Mistake #6: They forget they are moving into a construction zone
Anyone considering a new condo or home purchase should take into consideration the impact of ongoing developments. As one reader, who bought into the first phase of a three-phase condo development, recalls: “It’s noisy, everything is dusty and the air quality is just plain horrible—not even the best furnace filter could catch this dust. Combine that with the fact that the whole area is ugly for quite a long time and that access points can open and close, depending on the phase, and you have a recipe for long-term aggravation.”
Still, others, such as Jason Saxon, were mentally prepared for living in a construction site, and actually found it kind of fun—at times anyway. “You take the dust and dirt and noise with a grain of salt,” he says. “And it’s actually nice watching the homes go up.” In fact, there were only two days out of that first construction year when the Saxons and their neighbours felt truly inconvenienced. “When the builders put the final grading on our road no one could drive or park on our street,” Jason recalls. “For many of our neighbours that meant a hike through muddy and overgrown fields just to get home.”
Mistake #7: They think they have a warranty—but they don’t
Most buyers assume that all new-build lofts, condos and homes are covered by a provincial warranty, but this isn’t the case. Only three provinces—B.C., Quebec and Ontario—make warranty coverage mandatory. In fact, those are the only provinces that require new home builders to register with their respective provincial regulator at all.
“In Ontario, it’s illegal to build without being registered,” says Janice Mandel, vice president of corporate affairs at Tarion. But in other provinces, where the warranty program isn’t mandatory, builders can simply opt-out of coverage. Often they’ll try to convince home owners that they’re saving them the registration costs.
Buyers should be proactive and get their new home warranty in writing, says Mandel. They should also go online to determine if their builder is registered with a provincial regulator as a new home builder. This is particularly important for loft or condo conversions—residential units constructed inside an existing building shell. In such situations, new-build warranties often don’t apply.
Mistake #8: They’re not speedy with their warranty claims
When the Saxons first moved into their dream home near Edmonton, they were delighted. But they soon found themselves caught in a bureaucratic nightmare. During that first winter in their new home, they noticed a large crack in the cement-block floor of their garage. So they called the builder, who told them that when the ground thawed in the spring the problem would be fixed. A few months later, when the ground started to thaw, they noticed even more cracks stretching from their garage down their driveway. “We phoned, spoke to the site super, and even flagged down a builder’s representative, who promised us a new driveway.”
But weeks went by and nothing happened. “What was frustrating was coming home to see that our neighbour had a newly poured driveway and ours was still pock-marked and cracked.” That’s when Jason started sending emails. “You have to hound the builder, who seems willing to fix anything, but just needs a lot of motivation.” After weeks of sending emails and making calls the Saxons finally got a new driveway and garage floor.
The Saxons were able to get the problem fixed because they were proactive and understood that there are strict time limits on making claims. To ensure you understand how long you have, carefully read the package you get during the pre-inspection, as there are different deadlines for different types of warranty claims. “My advice: get a calendar and mark down those deadlines, and then make sure you get the claim in at least five days before the deadline,” says Peter Balasubramanian, vice president of claims for Tarion.
While you’re reading your new home package, you should also familiarize yourself with the maintenance you have to do to ensure your warranty remains valid. For instance, if you forget to change your furnace filters or fail to clean out your gutters you could find a claim regarding deficient heating or water penetration into your basement is deemed to be invalid.
Mistake #9: They’re ambushed by hidden closing costs
When you sign the purchase agreement for your new place, many of the closing costs are estimates. These costs often escalate as you approach your possession date, and both Rumack and Silverman have seen their fair share of “absurd” adjustments tacked on to a buyer’s purchase contract. For instance, you may find large charges that suddenly materialize for hooking up gas and electricity meters, plus mortgage discharge fees, development fees, deposit verification fees—Rumack has even seen a fee for “public art contributions” to cover the cost of a sculpture by a building’s entrance. “That’s why I pay close attention to the adjustments and try and get a cap on certain items and remove others,” Silverman says.
Mistake #10: They buy at the wrong time
If you’re buying a new condo or townhouse as an investment, the key is to get in as early as possible. In order to get the financing to start a new project, builders will often raise initial funding through pre-sales. These pre-sales often kick off with invitation-only VIP events, says Wynter. Usually, only high-volume realtors who specialize in the type of building on offer are invited. “If you see a line-up at a sales office, it’s often because a VIP event has been scheduled.” Once the VIP event is over, the builder will open sales up to all interested realtors, then finally they’ll open the project up to the public. “By the time a builder throws a grand opening for the general public, often 50% of the units have already been sold and the price has gone up three or four times,” explains Wynter.
It’s easy to get in on these VIP pre-sales, but you’ll need to work with a realtor who specializes in new developments and be ready to move quickly. For instance, the Paintbox development—the second phase of condos in the newly revitalized Regent Park area of Toronto—gave VIP realtors a week to register their clients for the pre-sale. Four days after registration closed clients were required to sign the paperwork.
Despite the potential savings on purchase price, this can be a risky way of buying real estate. When the Vancouver condo market turned in 2008 many pre-sale buyers found themselves with a contract price that was much higher than the current value of the unit. The builders refused to renegotiate the purchase contracts, and their banks refused to grant pre-arranged mortgages for the original purchase price. Many buyers were forced to either default—and lose their money—or find additional funding elsewhere, at significantly higher interest rates.
If you’re purchasing a freehold home, keep in mind that purchasing at the right time of year can also save you tens of thousands. For instance, in the Greater Toronto Area, the summer is the best time to shop for a new development, says Garrison. “People are on vacation in July and August and don’t have time to look for houses. When things slow down for a builder you have more bargaining power as a buyer.” Another good time to look is in December and January, but by mid-February activity starts to pick-up, says Garrison, and deals are taken off the table.
In Vancouver’s Lower Mainland the opposite is true: real estate and new home purchases are typically hot in the summer and slow down significantly over the rainy months of November and December. Each local market has its own cycle, so it’s best to talk to an experienced realtor.
Source: Real Estate Professional – by Neil Sharma10 Nov 2017
In the wake of Castlepoint Numa’s announcement that it failed to secure financing for Museum Flats, the highly touted and anticipated Junction Triangle condo development, many purchasers feel like they’ve been left hung out to dry in a market that’s grown more expensive.
By one purchaser’s account, this is the second time Castlepoint has informed his family that it will not be completing a development.
According to Akshay Dev, a sales agent with REMAX Realty One, researching builders is paramount. If he’d ever encountered a builder who failed to secure financing, he’d steer clear of them.
“I haven’t had a situation like that in my portfolio yet, but definitely before we get into projects I like to do some research about the builder to make sure they have a certain reputation, background and that they have credibility,” Dev told REP. “Some builders I like working with, and some I keep my paws off.”
Dev is frequently invited to development launches, which are good places to conduct due diligence. He likes to scrutinize the builder and their past projects, as well as determine whether or not problems could arise at any point during their latest build.
He added that, because banks typically provide financing when a development is 70% sold, a developer unable to secure financing might hint at other problems.
“If a builder is pulling out of a project, it means they lack credibility right there,” he said. “If a developer cannot achieve [70% sales], it means there’s something wrong there. Either the project or location aren’t good, or they don’t have the experience to handle the whole situation.
While Dev hasn’t had a builder fail to bring a project to market, he would tell his clients not to renegotiate with them for a relaunch, or even buy a unit in a future project.
“I would advise them to walk away. If they reached a point where they haven’t gotten financing, there’s a lot more involved in this. If you’re going to talk to a builder about getting financing, what is the guarantee that they’ll get it, and what’s the guarantee there won’t be problems afterwards? It’s a credibility issue right there and then.”
Zia Abbas, owner and president of Realty Point, agrees with that sentiment, and added that, as a sales agent, his reputation is on the line as well.
“As far as I’m concerned, whenever I go and sell any product to my client, for me the credibility of the builder is as important as the location of the project,” said Abbas, adding a builder’s credibility is in their portfolio. “What if we find the best of the best location but the project won’t proceed because the builder doesn’t have the reputation?”
Abbas admits that some builders he’s spoken to have said that they could pull out of the project and bring it back to market at higher price points that better reflect Toronto’s hot market, they wouldn’t sully their reputations that way.
“They’ll stick with the promises made, and this is what is called credibility,” he said.
But that doesn’t mean unscrupulous builders never give in to temptation.
Such builders don’t just damage sales agents’ reputations, they also lose the latter money.
“I’ve never worked with these builders and I’m not going to work with any builder with whom I’m not comfortable because the money I’m making on commission is all future commission,” he said. “There would be nothing in my hand. What if the project doesn’t go through? I’m going to lose time, money and credibility in front of my client.”
Abbas has been selling in throughout the GTA for a long time and says he’s had a couple of builders pull out of projects. Clients’ deposits were returned with nominal interest. As a veteran sales agent, he knows how to keep builders like that at arm’s length.
Toronto city councillor Ana Bailao recently went on record as saying that there needs to be more protection for purchasers like the ones who won’t be moving into Museum Flats.
Purchasers’ deposits are held in trust, but there have been cases in the past in which rogue builders and lawyers took off with the monies.
“Anybody who has invested money in real estate is investing hard earned money,” he said, “and hoping to grow that money and take their net worth to next level. We need to make sure wherever they put their money is safe. If they invest in certain people who don’t have a proven track record, then they are risking their investments. If you go to credible builders, chances are your money is safe, your project will be completed, the builder will get financing and deliver you a quality product. And with the right market conditions, you’ll get a good return on your investment.”
A Federal Court judge has approved at least one court order that will require a British Columbia developer to turn over information to tax officials about people who bought and flipped condo units before or during construction.
And several similar applications are under way, reflecting the federal government’s efforts to crack down on potential tax cheating in the presale market.
A July 25 Federal Court order requires the developers of the Residences at West, a Vancouver condo project at 1738 Manitoba St., to provide the Canada Revenue Agency (CRA) with documents related to presale flips, also known as assignments, in the building, including proof of payments and correspondence between the developers and people who buy the assignments.
That order followed a June 29 application from the federal government.
In September, the Minister of National Revenue applied for court orders related to One Pacific, a Concord Pacific project, and Telus Gardens, a downtown project developed by Westbank Corp.
Both developers said they would comply with the request for documents.
“Customer information is protected by privacy laws and is not at the developer’s liberty to disclose unless ordered by the Court,” Matt Meehan, senior vice-president of planning at Concord Pacific Developments Inc., said in an e-mail.
“To protect our customers’ information and ensure any release will be compliant with the law, we have asked CRA to obtain a court order, which we will adhere to.”
In an e-mailed statement, Westbank said it would comply with the minister’s application.
The CRA is investigating potential tax cheating in the presale market.
Developers presell units in projects to obtain bank financing. Those sales agreements can be “assigned,” or flipped, to somebody else before the building is finished.
A unit may be flipped several times before a project is completed. But only the transfer of legal title from the developer to the final purchaser is registered with the B.C. land title office.
That means the CRA does not know the identities of any buyer but the final one, and has no way to check whether the others have paid applicable taxes on those transactions.
The provincial government last May announced new regulations designed to limit assigning: Sellers have to consent to the transfer of the contracts, and any resulting profit must go to the original seller. But those new rules apply to single-family homes, not condo presales.
As the CRA heads to court to obtain data on presale buyers and sellers, some observers say the provincial government could cool speculation in the presale market – and support federal tax-enforcement efforts – by changing reporting requirements.
Presale purchasers may include people who are not Canadian residents and whose profit from flipping a presale contract would be subject to a federal withholding tax, said Richard Kurland, a Vancouver immigration lawyer.
He used the example of a person from Iran who buys a presale contract for $100,000 and sells it for $125,000 a month later. Under the Income Tax Act, that profit – because it went to someone who is not a tax resident of Canada – would likely be subject to a 25 per cent withholding tax, he said.
“If nobody knows that you’re from Iran and not a tax resident, and nobody withholds the money, you just walked off with $6,000 tax-free,” he said.
If information on buyers’ identities were routinely provided, the agency could more readily check to determine if, for example, anyone was claiming the principal-residence exemption on more than one property, Mr. Kurland said.
Asked if the CRA would like the province to make changes such as requiring routine disclosure of the identities of presale buyers, agency spokesman Bradley Alvarez said in an e-mail that, “any additional information, including that obtained from other governments and third parties, enhances the CRA’s ability to detect non-compliance.”
The CRA has found some flips are reported incorrectly or not at all and “the CRA welcomes any endeavours to obtain any information that can assist the Agency in detecting non-compliance.”
Developers support the CRA’s goals, but have to take privacy regulations into account, said Anne McMullin, president of the Urban Development Institute.
“It’s not the developers not wanting to hand over information, it’s, ‘Let’s do this safely,’ because of privacy laws,” Ms. McMullin said.
The NDP, which came to power after the May election, had said while in opposition that the Liberals were not doing enough to curb speculation in B.C. real estate.
In its election campaign platform, the NDP promised to set up a multi-agency task force to fight tax fraud and money laundering in the B.C. real estate marketplace.
Finance Minister Carole James was not available for an interview.
In a statement, her office said the province is monitoring the federal government’s court action, and tax fraud is “something that is taken very seriously.”
The B.C. government is working on a comprehensive housing strategy, and any policy or legislative changes will be made public once that strategy is developed, the statement added.
While various quarters have cited supply scarcity as a central driver in Toronto’s long-running housing affordability issues, latest census data actually belies that notion, according to a Bloomberg analyst duo.
In their latest piece, markets observers Erik Hertzberg and Theophilos Argitis argued that “the most important question remains the extent to which speculation is driving demand.”
“Ideally, fundamentals such as demographics and employment are at play, and the price gains reflect natural household growth getting ahead of supply. If that’s true, the market should eventually stabilize once new supply kicks in,” Hertzberg and Argitis wrote. “A situation where speculators are bidding up prices would be much more problematic.”
“Canada’s 2016 census, which the statistics agency is releasing piecemeal this year, is providing some insight into the debate. The results: supply may not be the big problem many people thought it was.”
The data revealed that between 2011 and 2016, the total number of Toronto households increased by 146,200 (up to 2.14 million). To compare, the number of newly completed homes stood at 175,825 projects.
“In other words, supply of new houses exceeded real household demand by almost 30,000 over those five years,” the duo stated. “That throws cold water on the argument — voiced particularly by the industry — that the city’s affordability crisis won’t be resolved unless the government introduces measures to help increase supply.”
More importantly, Toronto is rapidly running out of buildable space, “evident in census data that show its population density has surpassed 1,000 people per square kilometre for the first time ever, another factor that should continue supporting prices for detached homes.”
Canada’s population increased to 35,151,728 last year largely driven by growth in the West, according to 2016 census data released Wednesday by Statistics Canada.
The country’s population has grown five per cent since the last census in 2011, when it was at 33.5 million, the highest rate of growth among G7 countries. However, the growth rate declined from the 5.9 per cent increase recorded in 2011.
About two-thirds of the increase recorded in 2016 was due to net immigration into the country, while the rest was from new births.
The majority, or 66 per cent, of Canadians still live within 100 kilometres of the southern border with the U.S.
The number of private dwellings grew nationwide by 5.6 per cent to 14.1 million.
The population continued to boom in Western Canada. The quickest pace of growth was recorded in Alberta (11.6 per cent), Saskatchewan (6.3 per cent) and Manitoba (5.8 per cent). The three prairie provinces recorded the most growth in the country for the first time since Confederation, according to Statistics Canada.
Alberta had been the fastest-growing province in the 2006 and 2011 censuses as well.
The rate of growth was higher than in 2011 in both Alberta and Manitoba, the only two provinces that registered an increased rate of growth from the last census.
It is important to note that the census was collected in May 2016, so does not fully take into account the recent economic slump in Alberta.
“The census compares 2011 to 2016, and we’ve seen 15 strong years of growth in Alberta,” says Karen Mihorean, director general of the education, labour and income statistics branch of Statistics Canada.
Mihorean said Alberta is unique among Canadian provinces for having strong numbers in all three factors that contribute to population growth: immigration, interprovincial migration and new births.
British Columbia also grew faster than the national average, by 5.6 per cent. Just under 32 per cent of Canadians now live in the four western provinces, compared to 38.3 per cent in Ontario, 23.2 per cent in Quebec and 6.6 per cent in Atlantic Canada.
Low growth in Atlantic Canada
The four Atlantic provinces recorded the lowest growth in the country: 1.9 per cent in Prince Edward Island, one per cent in Newfoundland and Labrador (where more deaths than births occurred in some years) and 0.2 per cent in Nova Scotia. New Brunswick’s population decreased by 0.5 per cent, the only province with a decline since 2011.
“From East to West, population growth gets stronger and that’s a trend we’ve seen for the last few censuses,” says Mihorean. “In Atlantic Canada, it’s a case of seeing people leaving these provinces for other parts of the country.”
– 2011: Canada census shows people moving west
Ontario remained Canada’s most populous province at 13.4 million, an increase of 4.6 per cent from 2011. But Ontario’s growth rate was lower than the national average for the second consecutive census period, the first time that has happened in more than half a century.
Quebec’s population grew 3.3 per cent to 8.2 million, followed by British Columbia at 4.6 million, Alberta at 4.1 million, Manitoba at 1.3 million and Saskatchewan at 1.1 million. The population in Atlantic Canada was 2.3 million, with just under 924,000 residing in Nova Scotia.
The North was home to nearly 114,000, led by the Northwest Territories. The population of Nunavut, which at 12.7 per cent had the highest growth rate of any province or territory due to its high fertility rate, moved ahead of Yukon.
Western cities record greatest growth
While the rate of growth slowed in Canada’s three largest metropolitan areas, 35.5 per cent of Canadians now call Toronto, Montreal and Vancouver home.
Toronto remains the country’s largest metropolitan area at 5.9 million, increasing by 6.2 per cent since 2011. Montreal’s population has surged past the four million mark to 4.1 million, while Vancouver’s population now stands at 2.5 million, up 6.5 per cent.
With growth of 14.6 per cent, the highest of any metropolitan area in the country, Calgary is now Canada’s fourth largest city at 1.4 million, moving ahead of Ottawa-Gatineau (1.3 million). Also at 1.3 million, Edmonton is the only other Canadian city with more than a million residents.
The six fastest metropolitan areas were all in Western Canada: Calgary, Edmonton, Saskatoon, Regina, Lethbridge, Alta., and Kelowna, B.C., with all but the last posting growth of more than 10 per cent.
At the other end of the country, however, all of Atlantic Canada’s metropolitan areas recorded a slower rate of growth than in 2011, while the population of Saint John fell by 2.2 per cent — largely due to residents moving to other parts of Canada.
Sylvan Lake, Alta., was the fastest-growing census agglomeration, growing by 19.6 per cent since 2011, while Campbellton (mostly in New Brunswick but partly in Quebec) had the greatest decrease at 9.3 per cent.
Among municipalities with at least 5,000 residents, Warman, Sask., had the highest rate of growth since 2011 at 55.1 per cent, followed by the Alberta communities of Blackfalds (48.1 per cent) and Cochrane (47.1 per cent). Bonnyville, Alta., had the fastest rate of decrease at 12.9 per cent.
The population and dwelling counts mark the first set of data from the mandatory short-form 2016 census to be released by Statistics Canada. Further releases, including those related to gender, language, immigration and labour, will follow throughout 2017.
The data will assist decision-making across all levels of government and provide sociologists, demographers, urban planners and businesses with a wealth of information.
Q: I’m buying my first home—a starter home—that I plan to live in for the next five to seven years. How do I know which mortgage is right for me?
— Housing Newbie, Toronto
Answer from Robert McLister, mortgage planner with Ratespy: There are endless mortgages to choose from so get one-one-one advice when you can. In the meantime, here are four quick tips:
#1. If you plan to live in the home for five-plus years, then portability (i.e., being able to move the mortgage to a new property without penalty) is less important. But people’s plans change so don’t ignore porting features altogether. The best portability options afford you:
→ The lender’s best rates if you need to add money to the mortgage (helpful if you upgrade to a more expensive home)
→ More time to close your new mortgage after your old home sells (look for 60 days minimum).
#2. If you don’t foresee moving, refinancing or making big prepayments in the next five years, consider low-frills mortgages. You’ll get a cheaper rate in exchange for smaller prepayment privileges, bigger prepayment charges (aka, penalties) and/or a restriction on refinancing with other lenders before your renewal date.
#3. Most first-timer buyers choose a 5-year fixed rate because their finances don’t allow for much interest risk. But if you’re financially stable, have great credit and save at least 5% of your income each month, consider shorter fixed terms and variable rates. In our low-rate environment, they’ll give you extra savings.
→ If you do go variable, look for one that keeps your payment the same regardless of interest rate fluctuations. It’s easier for budgeting and gives you peace of mind if rates start climbing.
→ If you can’t decide between fixed or variable, check out a hybrid mortgage. Hybirds let you split your mortgage into two different rates (e.g., half fixed and half variable). They’re a great way to take advantage of lower rates while still protecting yourself if rates climb.
With so many open houses and so many choices, by the time you find a property that just has that right feeling, you’re usually tempted to grab for the pen and sign your life away. Take a minute though; because people often get so lost in the appeal of the home and property itself, they forget to consider the surrounding neighbourhood. And believe us, your new home can really lose its luster if its located say, a 30-minute drive away from the nearest grocery store or school. That’s why Canada AM hosts sat down with Real Estate Expert Sandra Rinomato, so that you can get the home you want, in the neighbourhood you want it in.
CONSIDER YOUR LIFESTYLE
Whether you have pets, or are extremely active or consider yourself a foodie–these factors can all influence the areas in which you might want to live. So take a second to think about all the things that are important to you, Rinomato says. Maybe you want a short commute, or want to be in close proximity to a dog park, or restaurants and shopping centres. This should be the first thing you do after figuring out your financing and having an idea of what you can afford.
If you don’t own a car or plan to rent the property out in the future, a solid walk score can go a long way (the higher, the better). A walk score is based on your ability to walk from the property in question to things like banks, transit, shopping centres and so forth. Rental tenants can be lured in by a high walk score, and it’s generally a plus to know that convenient services aren’t very far away.
It’s really easy to move into a new home and then realize it’s nowhere near or a school, or the kind of school you wanted to enroll your children into. Fortunately, there are many resources available online that can show you what kinds of schools are in your area (Ontario’s is right here).
By the time you have everything sorted–the neighbourhood, the school, the walk score, etc.–you might realize there’s no property that checks all of your boxes. Don’t worry, that’s normal. But often, it means sacrifices have to be made and you may have to look outside of your ideal neighbourhood. If this happens, Rinomato has some advice for how to find emerging neighbourhoods, where costs are still low but will rapidly rise in the future. The best way to find these spots is to look at the periphery of areas that are already hot and popular. As the population grows in the core, development will spread to the fringes.
Development charges are making it more difficult for young families to afford new homes.
So what are development charges? Ontario’s cities and towns pass bylaws to set development charges. They use these charges to collect money from new homes and businesses to pay for critical infrastructure: sewers and water pipes, roads, transit, parks and community centres. There is no doubting their importance.
The Development Charges Act is the over-arching provincial legislation that allows municipalities to collect them.
These bylaws are accompanied by a background study, which outlines the estimated amount and location of development within a municipality, and the related calculations of how the new services will accommodate the new population.
The topic of development charges (DCs) is part of the province’s 80-day public consultation on improving the land use planning and appeals system. I have been writing about the consultation in this space over the past few weeks and will continue to discuss it until the consultation ends on Jan. 10.
BILD and the Ontario Home Builders’ Association addressed DCs during a recent meeting held at our office that sought input from both associations’ members. The province is our partner in economic growth, and we have a lot to say about DCs’ effect on this growth.
In 2012 alone, the industry estimates that more than $1 billion was paid in DCs by new-home owners across the GTA.
But at the end of the day, DCs and other taxes represent one-fifth of the cost of a home in the GTA, according to a study of six GTA municipalities by Altus Group Economic Consulting. That is too much for a young family to take on.
The study involved Toronto, Markham, Oakville, Bradford West Gwillimbury, Ajax and Brampton.
Since 2004, those municipalities have increased DCs between 143 and 357 per cent.
Let’s look at the Town of Oakville, as one example: for a new single-detached home, Oakville charges $23,503 in DCs; Halton Region charges $36,778; Oakville’s school boards charge $4,175 in educational DCs to allow them to acquire land for schools. In total, that new-home owner is paying $64,456 in DCs.
Those DCs are added to new-home owners’ mortgages, and they must pay the interest on those charges for decades.
When DCs are the biggest charge on a home, they pose a threat to the affordability of homes and even the health of the home-building industry.
It’s important to note that our industry employs about 202,700 people and generates $10.8 billion in wages.
During the current 80-day provincial consultation, now is the time for citizens ton tell the province about what they think is fair and reasonable to be charged by the municipalities.
Municipalities do have other alternatives to raise revenue. And it’s time they looked at their other options.
This column has been updated from a previous version.
Bryan Tuckey is President and CEO of the Building Industry and Land Development Association and a land-use planner who has worked for municipal, regional and provincial governments. Follow him at twitter.com/bildgta , facebook.com/bildgta , and bildblogs.ca.