Why prices of new homes may make buyers shudder
Each month our organization releases market data about the number of new, single-family homes and condos sold in the GTA during the previous four weeks, their average prices and how many units remained available for sale.
The information is compiled by Altus Group, and often it’s the prices that catch people’s attention.
Price is an important consideration for many new home buyers, and affordability in our region has been declining.
New home buyers — and others watching the market — often want to know: “Why are the prices of new homes what they are?”
The prices of new homes are affected by a variety of factors, including supply and demand, rising land values and construction costs.
Another set of factors that have significant impact on the price of every new home in the GTA are the fees, taxes and charges levied by all levels of government.
An informal survey BILD conducted in March revealed that many people are not aware of these added costs or underestimate them. Yet the costs are significant.
According to a report prepared for BILD, government charges account for about 22 per cent of the cost of a new single-detached home; in Ajax, almost a quarter; and in Brampton, about 29 per cent.
The most significant component of government charges on new homes tends to be development charges, which are levied by municipalities.
Development charges are intended to pay for infrastructure and services like roads, transit, water and sewers, community centres and fire and police facilities.
Development charges can range from $36,000 for a single-detached home in Bradford West Gwillimbury to $86,000 for a single-detached home in Brampton, according to the Altus report.
Asking new homeowners to pay their fair share for infrastructure and services, through these fees, makes sense. But the problem is that, because development charges are rising so fast, new homeowners are shouldering a disproportionate amount for services we all use.
Since 2004, development charges have increased between 236 and 878 per cent across the GTA — which is 10 to 40 times faster than inflation.
Existing home owners have faced an average property tax increase of double the rate of inflation. Politically, development charges may be used to avoid the unpopular move of raising property taxes, but the reality is, they further hurt the affordability of new homes in the GTA.
That’s why, as the municipal elections approach, we are encouraging GTA residents to have conversations with their local candidates about housing affordability and supply, and ask them how they will ensure that government fees, taxes and charges on new homes are fair and equitable.
You can send an email to your candidates at buildforgrowth.ca.
Be sure to visit our Fall Home Show, running Sept. 28-30 at the Enercare Centre, at Exhibition Place in Toronto. Visit fallhomeshow.com and use promo code STAR5 to get a discount on your tickets.
David Wilkes is president and CEO of the Building Industry and Land Development Association (BILD) and a contributor for the Star. Follow him on Twitter: @bildgta
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