Single family home starts double

The resolution of the strike between Steelworkers Local 6500 and Vale may be causing the local economy to begin to rebound, Warren Philp, northern Ontario market analyst with Canada Mortgage Housing Corporation, said.

“Improved confidence after the resolution of the Vale strike will continue supporting the construction industry moving forward,” he said in a press release.

That is because, year-to-date, single family housing construction starts have doubled, from 87 in 2009 to 176 in 2010, between January and July of both years, he said. Philp added there has also been pent-up demand from a year earlier.

“As resale prices for existing homes have risen, that has prompted people to trade in their homes for new housing,” he said. “Low interest rates early in the year were part of that. 2009 was a poor year compared to the five to six years before that. There also was a hang-over effect from the economic recession.”

Despite the rise in single home starts, the building statistics still have a way to go to match the 10-year average for the month of July, he said.

“Usually there are 44 new single house starts in July. Instead there were 37, but that is up from 33 last July.”

Laura Higgs, executive director of the Sudbury and District Home Builders Association, downplayed Philp’s statements. She said, while she agrees local builders are busy, there are other reasons why single family housing starts are up.

She said the upturn in housing numbers from people buying earlier in the year could be from people trying to beat the threat of rising interest rates and changes in mortgage criteria. Interest rates increased recently from a half percent in May to .75 per cent in late July, the Bank of Canada’s website said.

“People knew interest rates were going to increase, so they wanted to lock in their mortgages,” she said. There were also changes in borrowing policy from Canada Mortgage and Housing Corporation so the early numbers could have been a bubble effect, she said.

Borrowers now have to be able to sustain a fixed rate of interest for a five year period even if they borrowed for a term under that period at a lower rate of interest, Charles Sauriol, CMHC media relations officer, said.

Another factor is the Harmonized Sales Tax (HST) coming into effect July 1. Homes with a value of $400,000 or over have HST tacked onto them, Kristi Arnold, a sales representative with Dalron Construction, said. That means more tax has to be paid than in 2009 when there was only the GST cost included in the price for Dalron homes.

“In the South End of the city, most of our new homes being built are approaching $400,000 in value or are over that,” Arnold said. That means a buyer would have to pay an extra $6,000 tax on a $400,000 home or about $9,000 more tax on a $450,000 home, she said.

“This is a significant added cost.”

Arnold said many people were confused as to at what price level the HST kicked in, and that caused a rush in early year sales.

While the summer was quiet for Dalron, possibly due to the exceptional weather, calls are coming in from customers now, Arnold said.

Dalron is constructing a project in the South End on Countryside Drive with 32 semi-detached units. They decided to go ahead with the project in order to beat the increase in development fees on construction projects the city began in January.

“A lot of builders, like us, got their applications in before January and are now starting foundation work on their projects.”