The Tarion new home program provider is in transition, and its future depends how the new Conservative government will implement or ignore changes announced by the previous Liberal government, says Greg Graham, a Tarion board member.
Graham, chief operating officer of the Cardel Group of Companies and president of Cardel Ottawa, said Liberals had decided to split the organization into two separate authorities, representing the regulator and warranty provider, but “they thought they could do it with no money” — and builders would pay for the additional costs.
“The current government hasn’t decided if it wishes to continue down that road” with the possibility of a private market, where insurance companies could come in and provide the warranty services, he said.
Graham also said Tarion is noticing that clients expectations and program costs are continuing to increase.
In a presentation to the 2019 Greater Ottawa Home Builders’ Association (GOHBA) Hello/Goodbye breakfast, Graham observed that technology and industry practices are likely to change in the near future, especially in the direction of manufactured and factory-built homes.
He said the overall Canadian housing market has experienced a severe decline of affordability compared to the US in the past 10 years.
The homebuilding industry is “one of the most resilient industry sectors out there,” he said.
There’s a wave of amalgamation coming to the industry. “Big publicly traded companies are buying smaller companies,” he said. “That’s eliminating competition, and putting a lot of people out of the competitive market.”
While there are almost no publicly traded home builders in Canada (Mattamy is an exception) there is pressure with affordability, including rising development charges and and other “government imposed charges and red tape affecting our market.”
Meanwhile, Cheryl Rice, president of PMA Brethour Realty Group’s Ottawa division, says Ottawa’s new home housing market in 2018 declined somewhat from barn-burner year in 2017, but the reason wasn’t declining demand – sales dropped largely because of an inventory shortage.
Rice said the 2019 forecast looks positive, as housing is still reasonably affordable in the city and builders are bringing product to the market to meet increasing consumer demand. However, there are some uncertainties clouding the projections.
She described a “sellers market” environment in the resale housing industry, saying there also is demand from “refugees” from the Greater Toronto Area fleeing unaffordable housing prices there.
Overall, she said 4,953 new homes were sold in Ottawa in 2018, compared to 5,560 in 2017. This is still well above the 10 year average of 4,697 homes.
Resale homes gained a 3 per cent market share increase to 78 per cent in 2018, with new homes taking the remaining 22 per cent. These market share numbers are consistent with the totals through most of the last five years.
“Last year, many of our new home projects ran out of inventory,” she said. “Numerous products and projects sold out across the city. For sure it was a challenging year, as you were trying to get projects and products to market.”
Reasons included labour shortages, the need to extend closing dates, and a slow development approval process. Together, these forces “competed to deplete the inventory without much to replace it.
Overall the local economy is healthy, with stable income and the highest median income in Ontario at $86,000. In Ottawa, “the household income needs to be $76,000 to qualify for a mortgage.”
“Statistically speaking, we’re in good shape,” Rice said. “Consumer confidence remains high. Ottawa’s economic forecast is positive, slower but still positive.
“These fundamentals are pillars of a resilient market, providing a buffer from external housing and market conditions,” she said.