Table of Contents
Rising interest rates and uncertainty over where they’re headed are dampening the city’s home building market, says the CEO of the London Home Builders’ Association.
Article content
Rising interest rates and uncertainty over where they’re headed are dampening the city’s home building market, says the CEO of the London Home Builders’ Association.
Advertisement 2
Article content
“Unfortunately, it’s not a huge surprise and frankly, with the announcement of the interest hike (Wednesday), that’s a bit of a barometer for the industry right now,” Jared Zaifman said. “There are two factors at play. Building costs continue to go up as interest rates go up and, at the same time, with the uncertainty that we still don’t know when the hikes will end, buyers have cold feet.”
Article content
None of the new home-build numbers in a city hall staff report heading to city council’s planning committee are encouraging:
- From January 2023 to the end of April, there were applications in process for 509 dwelling units, compared to 707 dwelling units in the same period in 2022.
- Permits to build new single and semi-detached houses dropped from 246 in the first four months of 2022 to 61 in the first months of 2023, a drop of 75.2 per cent, the report states.
Advertisement 3
Article content
The Bank of Canada raised its benchmark interest rate to five per cent Wednesday, the 10th rate hike since March 2022, in an ongoing effort to cool an economy marked by inflation and rising job numbers. Several larger banks followed suit the next day, raising their lending rates.
“The rate itself is less important than the uncertainty about whether it’s going to rise again,” Zaifman, himself a former city councillor, said.
“Buyers really need the certainty that the rate that they’re hoping to lock into with a mortgage is something they will be able to continue to afford,” he said. “There are likely buyers out there who can afford mortgages even with the recent hike, but it’s possible another quarter per cent may be too challenging for them.”
Advertisement 4
Article content
-
For London builders, a growing shift from single-family homes to apartments
-
Here’s how London plans to build 47,000 homes in the next decade
Meanwhile, builders are reluctant to build because of their own rising costs and reluctance on the part of buyers, he said.
“It’s sort of the chicken and the egg. From a sales perspective it’s hard to put that much capital out there knowing you may be in a very difficult financial position because buyers aren’t out there willing to pull the trigger,” Zaifman said.
Builders would prefer the rates go down, but would settle for at least the knowledge they’re not going to go up, he said.
Builders have been encouraged by recent measures from city hall to speed up the application process, but there are still some delays, Zaifman said.
“Some of our builders have buyers expecting their homes to be ready and occupied soon, but there have been some delays,” he said.
But it was encouraging to see a report to the planning committee last month that included measures to increase the capacity in the building department, Zaifman said.
The planning department is adding staff and reviewing operations with an eye to streamlining the application process, a report to last month’s committee meeting said.
“We just need to see some of those items start to unfold,” Zaifman said.
Comments
Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.
Join the Conversation