CHBA-NL CEO, Victoria Belbin, shares her thoughts in a new blog on the recent media coverage about the cost of new housing in NL. Read the blog post below:
“I’ve heard it said that the definition of statistics is the science of producing unreliable facts from reliable figures.” Victoria Belbin, CEO CHBA-NL
Unreliable Facts from Reliable Figures: The REAL Story About NL’s 2016 New Home Construction
Scan local news sites or papers and the headlines about the Newfoundland and Labrador housing market paint a picture of a sector in a critical state. ‘New Home Prices Down 10%.’ But what are the facts behind the headline-grabbing stories?
The source of the confusion over numbers comes from a misinterpreted CHMC report suggesting that local housing prices have seen a double-digit decline. But a few quick facts and figures show where that average drop in the overall housing market has come from:
- In 2013, the average new home sold for around $400,000 and was within a range of 1700 square feet.
- In 2016, the average new home is selling for roughly $350,000 in price, is on a smaller lot and would be approximately 1200 square feet.
Take that average price for new home sales out of the picture, and a house that cost you $350,000 in 2013 is still in the range of $350,000 in 2016. Likewise, the house that would have cost $400,000 is also still roughly the same price. But these two houses are completely different homes appealing to different segments of the market.
Beyond that average, the price of an individual home has not changed that drastically.
The fact is, the local housing market overall has changed. A different buyer with a different focus is now driving demand. Younger, first-time buyers are looking for smaller, lower-priced homes. In response, the type of house that builders are developing is changing to suit that transforming need.
A slowing economy does mean that new housing starts are down, but, contrary to the chatter, housing prices have not declined as much as you might think. CHMC’s July 2016 report states that new home construction has decreased by just 2.8% from July 2015.
So there’s the heart the story: The bulk of buyers are now a younger customer looking for that $250,000 to $350,000 starter home. As a result, that trend is driving down average sale prices.
Look at the historical averages and market trends tick up and down. Until recently, prices for existing homes in the St. John’s CMA region had been rising among the fastest in Canada. The price of an average new home rose 114% in the St. John’s CMA region in less than a decade. Factor in the price of land tripling during that time, rising costs of materials and labour, and the significant increase in government-imposed costs at the municipal level and that rise in prices starts to add up.
Staying on top of the trends, builders and developers have been working with municipalities to create homes in reach of financing for first-time buyers. When the market shifts, builders will again respond with more up-market homes.
That’s the big picture for new home construction in 2016. Next time: the renovation and repair sector.