Developers on shifting ground
CAROLYN IRELAND
Globe and Mail
September 19, 2008 at 12:00 AM EDT
With financial markets roiling, oil and gas prices gyrating and the extent of the fallout in the Canadian real estate market uncertain, many current and aspiring homeowners seem content to stand still and wait out the turmoil.
Home builders don’t have that option.
“This whole industry is a big ship and it doesn’t turn on a dime,” says Niall Haggart, vice-president at Daniels Corp.
Builders and land developers face a battalion of challenges right now: Spillover from the collapse of the U.S. housing market is starting to drag down real estate sales and prices in Canada but no one can predict how long or steep the slide will be.
In Ontario, the government’s official plan to curb urban sprawl is making land available for building scarce and therefore more expensive, developers complain.
At the same time, higher materials costs for builders are also pushing up the cost of even a modest townhouse in the suburbs out of the reach of first-time buyers.
Meanwhile, immigration brings potential new buyers into the housing market just as the looming retirement dates of baby boomers could lead to a wave of downsizing.
Builders buy land several years before they ever have a house or condominium unit ready for a buyer. Many are trying to adjust to the shifting landscape and predict where the market will be a few years out.
This combination of economic factors, government regulation and concern for the environment is bringing changes to the building industry, says Mary McDonough, vice-president of strategy and brand development at Empire Communities.
“It will force the industry towards intensification in general.”
That means fewer traditional family homes on 40-foot-wide lots and more high-rise condominiums and low-rise townhouse complexes.
Greenfield development of farmland is giving way to “grey-field” building on top of parking lots and strip mall sites.
Ms. McDonough notes that economists differ in their opinions of how high the price of oil will go and over what period of time. Recently, financial markets mayhem sent the price of a barrel of oil below $100 (U.S.) again, while the price of gas at the pump was driven up when hurricane Ike blasted the U.S. South.
Longer term, economists expect the trajectory to be up.
“Certainly oil prices are going up over time
