Tag Archives: home builders association
Richard Gilbert – Daily Commercial News and Construction Record
The fall in Canadian home sales in July was driven by declining sales in British Columbia and Ontario after the implementation of the harmonized sales tax (HST).
“Because of the hype that was going on, there was pent-up demand and people were rushing to buy homes before the deadline,” said M.J. Whitemarsh, chief executive officer of the Canadian Home Builders’ Association of British Columbia.
The B.C. and Ontario governments harmonized the provincial sales tax (PST) with the federal goods and services tax (GST) on July 1. The HST created a single combined sales tax rate of 12% in B.C. and 13% in Ontario.
The Canadian Real Estate Association reported that seasonally adjusted home sales through its MLS service across the country were down 6.8% in July compared with June.
The report found that declines in British Columbia (14.1%) and Ontario (8%) accounted for 85% of the change in national activity in July.
Peter Simpson, president and chief executive officer of the Greater Vancouver Homebuilders Association, said a number of factors are responsible for the decline.
“People did accelerate their decisions because the HST was coming in. The builders worked very hard to deliver houses before July 1.”
National sales activity was 30% lower in July 2010 compared with last year’s record July.
However, year-to-date transactions are still up 5.6% compared to the first seven months of last year.
This gap is expected to continue to shrink as the year progresses, since activity rose sharply over the second half of last year, reaching levels that are unlikely to be matched in the final five months of 2010.
“The sales process has also slowed because it is taking the builder and the sales office longer to explain how HST will be applied,” said Whitemarsh.
“There is a misconception. People did not understand it and people think there is HST on the resale of housing. This may exacerbate the problem that is already there.”
TD economist Grant Bishop agreed that the implementation of the HST in Ontario and B.C. has reduced sales substantially.
He said existing homes sales are not directly taxed, but some buyers rushed to buy them under the mistaken impression that HST applied, thus helping to push up prices.
“With housing 10–15% overpriced, we expect a downward correction of nearly 10% in the monthly average prices, followed by several years of stagnation of price growth at the rate of inflation, in order to bring Canadian house prices back to balance,” he said.
The HST increased the cost of a new house worth more than $525,000 in B.C. and $400,000 in Ontario.
When the tax was initially proposed in B.C., the threshold was also $400,000.
“We told the provincial government that $400,000 was a ridiculous threshold,” said Simpson.
“In the end, the threshold was increased to $525,000, which did help.”
Both Simpson and Whitemarsh want the government to find ways to mitigate the impact of the HST.
To begin, they would like the $525,000 threshold linked to the housing price index.
Simpson said he would also like first time buyers to get an exemption from the property transfer tax.
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Jane Gadd – Globe and Mail
Ontario builders say that tougher insulation standards unveiled in the province’s new building code will add between $10,000 and $15,000 to the average cost of a new home in the next six years.
“The energy-efficiency targets set out by the government for 2012 represent a monumental shift for our industry,” Victor Fiume, president of the Ontario Home Builders Association, said in a statement. “This will seriously affect affordability of housing in the future.”
The province’s new building code calls for the staggered implementation of a 29-per-cent increase in ceiling insulation levels, a 50% improvement in basement wall insulation, windows that are 67% more airtight, and a minimum energy-efficiency rating of 90% for new furnaces.
The government says the new standards will save enough energy to power 380,000 homes in the next eight years, and will reduce greenhouse gas emissions by an amount equal to removing 250,000 cars from Ontario’s roads. Homeowners will be able to recoup the added costs through savings on gas and hydro bills, it adds.
“Conservation is a fundamental and key component of our energy plan for Ontario,” Energy Minister Dwight Duncan said. “The 2006 Building Code will enable future homeowners to enjoy long-term energy savings and at the same time reduce Ontario’s overall energy use.”
But Mr. Fiume described the changes as one more factor pushing up real estate prices.
“As an association, we are always concerned with the affordability of new homes for consumers,” he said. “With escalating new and resale house prices, rising interest rates, escalating development charges and increased cost of materials — and now the addition of costs related to the implementation of the new [code] — housing affordability will continue to be a challenge for Ontarians."
The new code also requires more accessibility for people with disabilities in buildings constructed from now on. Public corridors will have to be wide enough to accommodate modern wheelchairs, tactile signs will have to be provided for the visually impaired, and 10% of units in any new apartment buildings and hotels must include accessibility features.
"This change will increase flexibility and choice for hundreds of people with a developmental disability who are in need of supportive housing," said Geoffrey McMullen, chairman of the Provincial Network on Developmental Services.
The Canadian National Institute for the Blind also expressed approval.
"People with disabilities make an enormous contribution to our communities," CNIB director Dennis Tottenham said. "We are pleased with the government's progress in making Ontario accessible to all."
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By Garry Marr, Financial Post
It was heralded as another perk for condominium owners, but when the City of Toronto created a new rule this year that required developers to provide 12 months of free transit to buyers, Monarch Corp. saw another cost.
“It will be added on [to the price]. It’s like the cost of lumber or concrete,” says Brian Johnston, president of Monarch, whose 25-storey tower The Legacy includes a one-year Toronto Metropass for all 330 owners.
Transit passes and green roofs, which require condominium developers plant a certain amount of vegetation on their buildings, are just the latest wrinkles that cities are adding to the cost of building.
While politicians see these levies as the cost of increasing density in their urban areas, builders see them as development charges by another name.
“You add them all up and at some point a high-rise condominium unit becomes uneconomical,” Mr. Johnston says.
Then there’s public art. Publicly, developers are for it and get involved in a process that, in Toronto, means they could end up contributing 1% of their construction costs if looking for rezoning on a project.
In Vancouver, private developers requesting rezonings greater than 100,000 square feet were required in 2009 to contribute $1.81 per buildable foot to a public art process approved by the city.
And in Halifax, developers are “encouraged” to allocate 1% of capital costs to art projects for developments more than 25,000 square feet. They get their zoning if they come up with the cash.
Karen Mills is a public art consultant in Toronto and works on behalf of Monarch Corp. She has been in the field for 25 years. She says developers have a history of adding some type of art to their projects.
“It started in the late 1980s in Toronto, encouraging developers to contribute 1% of the their costs to art. But it really started in the U.S. in the 1960s. There was a reaction against stripped-down modernist buildings. The public started saying they didn’t like these empty barren plazas in front of office towers,” Ms. Mills says.
While developers are happy to participate in such programs, Ms. Mills agrees all of them see it as a cost of doing business. But there is a payback, she argues.
“Developers who have done multiple projects and been successful know if you want to increase density you have to come through some type of negotiation to get this opportunity to make more money on your development. You have to pay one way or another,” she says.
“Anything that makes a building more distinctive gives it higher recognition value,” she adds. “Public art can be a positive from that perspective, unless of course you hate the art and then it’s a negative.”
Certainly, the condo boom has been a boom for artists. On a $50-million project, 1% of construction costs would amount to an art installation worth about $500,000.
“It’s employment and it’s employment in my area of expertise. Isn’t that great?” says Barbara Astman, the artist behind a project at The Murano, a development on Bay Street, just north of Toronto’s financial district. Her project incorporates colour photographic imagery on 217 exterior windows surrounding the building.
She notes the architect told her at the condo’s opening that she had made the building even better. “That’s what you want to do, add value. You don’t want to be someone who just decorates a building. It will now be a signature for people who live in that building,” Ms. Astman says.
Jane Perdue, public art co-ordinator with the City of Toronto, says public art only affects a small percentage of rezoning applications, but the big projects are targeted. “It’s a minority of buildings, but probably the ones that have the biggest impact,” Ms. Perdue says. “Ultimately, it’s about density exchange,” she says, adding, “if the public art is interesting, the building probably is too.”
Public art may not be required on every project, but that doesn’t mean the developer seeking rezoning is off the hook. Sometimes the developer will be asked to contribute that 1% to another project in the ward where they are building.
For the condominium buyer, the public projects are not supposed to add to their long-term maintenance fees. In the case of Toronto, developers are encouraged to include a maintenance endowment as part of the 1% levy.
Mark Mandelbaum, chairman of Lanterra Developments, says Toronto developers typically want input into the art projects being added to their buildings, but probably wouldn’t participate in such projects if they were not required.
“When you have 1% of your hard costs, that’s a lot of money,” Mr. Mandelbaum says. “A developer typically looks at public art as another development charge, like cash in lieu for parks. It is a municipal charge, but at the very least if you use it wisely, you can make the building more valuable with [the money].”
Developers point to other charges — land transfer taxes, the July 1 harmonized sales tax in British Columbia and Ontario — as all contributing to rising condo prices.
“Ultimately, what prices are to the end consumer is a combination of all the costs of bringing a product to market and whatever reasonable profit expectation that developer wants, given the risk of a project,” Mr. Mandelbaum says.
Peter Simpson, chief executive of the Greater Vancouver Home Builders Association, likens some of the negotiations between cities and developers to “creative arm twisting.”
“Of course it raises prices. A builder is not like any other manufacturer of a product. If there’s a cost associated with the manufacturing process, it gets added on and the user ends up paying the bill. Art is just another thing in a long list of charges. It’s a way to extract money from an easy target. But the target is really the homebuyer.”
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