We place a lot of importance on educating and supporting buyers, and understanding the challenges that builders have, in order to help ensure that the pre-construction market moves toward a common goal – providing enough affordable, well-planned new communities.
During our everyday interactions with both home builders and buyers, the team at In2ition Realty gathers a lot of information about the real estate market from both sides of the table. Understanding challenges and analyzing trends not only helps us formulate better internal processes, it lets us plan and communicate with others so we can help everyone win.
Last month the Ontario government unveiled several new policies and initiatives in the Fair Housing Plan, in an effort to support balanced supply and affordability in key markets in the Greater Golden Horseshoe.
We studied a few of the points of the Fair Housing Plan, and analyzed how they will affect the housing market. Using data from our organization and that compiled from the builders we work with, and the hundreds of people we meet in sales offices across the country every day, here’s our point of view.
Availability of housing
Quite simply, there are not enough new homes or condos on the market to meet the buyer demand. Why? The approval process takes too long.
In my experience, it can take up to 10 years for land to be housing-permit ready. Why is this happening? What started out as a builder/developer problem has quickly become everyone’s problem. The government says it is now convening its members along with the development industry to examine how to deal with approval delays and fast-tracking processes. However, we continue to have daily discussions and hear frustrating accounts from both our development clients and from potential purchasers, who have been waiting for years for certain municipalities to approve new developments.
In my view, availability of supply is the largest issue here, and it needs to be tackled quickly by implementing steps to speed up the approval process, such as adding more staff to Ontario Municipal Board (OMB).
The various municipalities and the Ontario government’s policies on expediting developments also doesn’t help the approval process, as these policies often seem to be at odds with each other, which only adds to the length of time it takes to secure building permits.
It’s important to understand why new developments take so long to get approved. We have been watching new developments selling-out in record time for several years now. It’s time for the government to put the right steps in place to allow the supply of homes to keep up with demand. Alleviating pent-up demand would help keep housing costs from skyrocketing. The lack of supply has made this a seller’s market – it is simple economics.
New foreign buyers’ tax
We’ve surveyed our last 2,000 purchaser deals across the GTA and found that only 2.3 per cent involved foreign buyers. Putting a new tax in place is a miss to us. Why more taxes? Why not a subsidy for first-time homebuyer deposits instead?
By using the same strategy as the province of BC, with a theory that imposing a tax in a hot real estate market will help cool the market and lower prices, does not work. In Vancouver, where soaring housing prices continue to dominate the daily news, the tax resulted in a temporary decrease in prices and sales. If you look at the numbers today, the prices of homes in Metro Vancouver are bouncing back and affordability is still a major issue. Foreign buyers will still buy, despite the added tax. They may hesitate a tad longer now, but I believe it’s only temporary as supply is still an issue. According to our statistics, we believe there are not a lot of foreign buyers in the Greater Golden Horseshoe, and taxing them is not going to have any significant impact on the market.
Banning assignment clauses on condos
An assignment clause allows a condo purchaser to sell (or “flip”) their unit before it officially closes. Our builders carefully monitor the number of assigned units issued, and do not allow buyers with this intent to purchase more than one or two units. All of our assignment clauses are worded in such a way that the builder still must give permission, so as to not allow multiple flips on one unit, as in BC.
While the idea of completely banning this practice might appeal to the Ontario government, some further thinking may be in order, as this can be of potential detriment to some purchasers.
In the case of a brand new condo, it can take upwards of two to five years or more to complete construction. What if a buyer’s family or employment circumstances change, and they need to sell?
Limiting assignments to one per person makes sense, but banning this practice altogether could be problematic.
Improved realtor transparency
The decision to review rules for resale real estate agents was approved to ensure fair representation of consumers. A new measure was put in place to ensure the practice of “double-ending,” when one agent represents more than one party in a transaction, is fully disclosed.
In order for this to be successful, new reporting practices will need to be put in place, as well as a proper enforcement process without causing administrative and bureaucratic woes.
New rent control policies
Implementing a standard lease for all tenants and imposing rent controls for all privately held units is not necessary. Research firm Altus recently showed that, out of 10 world-class cities, our rental market is still the cheapest by far. For small landlords, this new legislation may make it difficult to be competitive and/or to manage existing tenants from old leases that are well below the current rental rate. Plus, small investors – who have been buying one or two units as a way to fund their retirement savings plan – should not be deterred. Investing in real estate is part of the great Canadian dream and one of the reasons that many of our parents immigrated to this country – having the ability to build financial stability.
We have seen cancellations of purpose-built rental projects right after this announcement was made. This seems to be in contradiction to what the government is trying to achieve.
We see on our sales floors the direct impact of these potential policy changes on our consumers. We feel that deeper analysis and further consultation with the various professionals in these facets of the industry is necessary to be fair and equitable to all.