New federal mortgage rules further cooled Alberta’s home building market by making it tougher to buy a first home, says the chair of a group representing builders, developers and renovators.
“The real estate market, in general, has been slow,” said Steve Bontje, chair of Building Industry and Land Developers (BILD), which represents home builders, land developers and renovators.
“It’s been a challenging year for new home construction.”
The slowdown is provincewide. Alberta Treasury Branch said on Friday that Alberta’s house building rate has fallen to its lowest level in 10 years.
“The tumble in housing starts likely stems from the market’s imbalance of supply and demand,” says ATB in its report. “There is a massive inventory of unsold homes on the market, particularly in Edmonton and Calgary.”
In Red Deer, residential permit numbers continue to trail last year’s pace. There were 567 residential permits worth $26.1 million issued to the end of September, compared with 704 worth $38.1 million over the same period last year.
Bontje said the city has fared better than the big centres.
“We’re fortunate in Red Deer we don’t have some of the inventory problems that some of the bigger cities do. Edmonton and Calgary are really seeing a lot of empty spec product on the market,” he said.
“Red Deer has avoided that.”
However, a new mortgage rule that that took effect Jan. 1 requires home buyers to qualify for mortgages at rates two per cent higher than those in their lending documents. The expected improvement in the local real estate market this year stalled as a result.
“I think we would have expected (housing markets to improve) too, but those mortgage rules kicked in Jan. 1.
“The sales we don’t make January, February, March, are the houses that don’t get permits pulled on them in May, June, July and August.
“I think that’s part of what you’re seeing is it’s more difficult to qualify for a mortgage, so there are fewer starts.”
The mortgage qualification changes have also affected affordability. That means those looking to upgrade opt to stay put and potential first-time home buyers rent.
Laebon received approval this week for a 170-rental unit building located at 70 Thomlison Ave. in the Timber Ridge neighbourhood. Construction is expected to begin next year.
While apartment vacancy rates are high, there will always be a market, he said.
“As people move here, if purchasing isn’t an option for them (because of) mortgage rules or whatever, there has to be somewhere to go.
“We want to make sure we can offer that choice.”
With a provincial election coming up, BILD sees an opportunity to ensure political decision makers are aware of the pressures on the affordable housing market.
“Anytime we add costs for whatever reason, whether it’s building code changes or off-site levy changes, or whatever the case may be, that impacts the price of housing.
“Those costs get borne by the end purchaser.”