Toronto Builders Cry Out as Mortgage Rule Effects are Felt
First CAAMP was asking the federal government to rescind the mortgage rules that went into effect in July, and now Toronto builders are doing the same thing.
According to their latest statistics, the Building Industry and Land Development Association (BILD) says that sales in the GTA have dropped by 14% in the first 10 months of 2012, and that this will be one of the worst years on record for Toronto. Their concern is not only for the first-time buyers who are now priced out of the market because they don’t have a full down payment, but mainly for those in the construction business. BILD says this drop in numbers is going to contribute to a drop in the number of jobs available – and that this will hurt the entire economy.
“In an attempt to cool down the market, the federal government has severely affected the building and development industry in the GTA,” says Bryan Tuckey, chief executive officer of BILD. “The introduction of stricter mortgage regulations has triggered a decline in new home sales, and if this trend continues, it will affect job creation in the coming years, restricting economic growth.”
The organization does go on to say that last year alone the industry was responsible for creating 193,000 jobs and distributing $10.1 billion worth of wages. There were no stats given for how the mortgage rules would affect those numbers this year.
And while there were only 2,792 new homes sold during the month of October this year, and BILD is correct in saying this is the second-lowest October that’s been recorded, high rises did quite well. In fact, with 1,914 high-rise units still sold within the city during that time, it was the fifth best October on record. So it really depends on what stats you’re looking at.
There’s a good chance that the federal government is looking at all of them as they try to manage their delicate balancing acts of keeping the housing market under control, while allowing industries to rely on it to continue churning at the same time.
Unfortunately, prices have still to show the desired effect from these mortgage rules. RealNet Canada Inc. shows that prices on low-rise homes are up 16% from 2011, now sitting at $616,623. The price of high-rises continues to climb as well, although at a bit slower pace rising only 2% from 2011, to $439,328.
Mr. Flaherty’s hope, along with the rest of the Conservative government, is to make it more difficult to buyers to buy a home, which will tamp down demand some, and force sellers to affix more reasonable prices to their homes. As we see them continue to increase, we have to know that we’re getting closer to the slight drop in home values that are also expected to come from the mortgage rules – some say a drop of 10 to 15%.