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New Home Market Adjusting
New home construction activity in Hamilton this year will decline by 29 per cent to 2,500 starts before trending back up six per cent in 2010. A slowing economy and more choice in the resale market will dampen construction. Increases in residential construction in 2010 will also be tempered by the transition to the new sales tax on housing.
Tanya Hutchens says, although starts are expected to be down for all home types, single- detached starts especially will put a damper on total starts. Less than half of the new home starts through to 2010 will be single-detached homes.
Townhouse and condominium apartment starts will continue trending upward, especially since the condominium lifestyle is becoming more popular among all household types. A recently constructed, high-end condominium apartment building in Hamilton Mountain is one step toward fulfilling the lifestyle demands of some households, including the downsizing baby boomer generation.
By sub-market, approximately half of the starts will be in Burlington, with the remainder sparsely distributed across the rest of the CMA. Fewer starts in the new home market indicate that builders and buyers alike are hesitant to make a move in an uncertain economy.
Builders continue to focus on completing and selling current inventory while holding off on future projects. Starts for the year to-date are down 31 per cent while projects under construction are up by the same proportion, suggesting a shift in resources from new starts to ongoing projects. More than a third of the projects under construction are of condominium townhouses and apartments in Burlington In Brantford, single-detached home prices fell three and a half per cent to $282,000 for the first quarter of 2009.
Year to date, total starts are on par with last year’s level, and single-detached home starts have nearly tripled in the City of Brantford. However, this trend will likely taper off throughout this year due to the high number of unsold new homes. There were 116 unsold units at the end of the first quarter of 2009, all of which were single-detached homes and townhouses.
Considering the current economic conditions, some buyers in Brantford may be more inclined to look for a home in the relatively less expensive resale market. An increase in the supply of unabsorbed homes will depress the average price this year and builders may put off starting new projects until the completed units are sold. 360 new home starts are forecast for 2009 and 380 starts for 2010.
The New Housing Price Index - an index which captures the changes over time in builders’ selling prices of new homes of constant quality - started to plateau last year. More recently, home prices have started to fall in several sub-markets across the CMA, though the rate of decrease has been less than in the resale market.
Prices continued to rise in the more expensive home markets of Ancaster and Burlington, where half of the homes were absorbed. This indicates that there are still buyers who are looking for upscale homes, while taking advantage of the low mortgage rate. Should economic conditions stabilize, buying in expensive submarkets could be brought forward in advance of the introduction of the harmonized sales tax.
