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Consumer Confidence Improves; Development Charges, Underground Economy More Critical for Home Builders

February 23, 2010

Consumer confidence is no longer the critical problem it was a year ago for most new home builders, according to the Winter 2010 Pulse Survey of the Canadian Home Builders’ Association (CHBA).

The survey reported that only nine per cent of builders, nationwide, cited consumer confidence as a critical problem compared to 54 per cent last winter. In Ontario it was still a critical problem for 17 per cent of the respondents.

Higher traffic at new home sales sites among first-time buyers, move-up and move-down segments of the market was reported by builders across the country. A year ago most builders reported lower traffic.

New home builders expect that housing starts will remain low, at about 142,900 units in 2010, slightly below the 149,100 units started in 2009 and well below levels recorded between 2002 and 2008. No region expects starts to be higher this year than last.

Rising costs due to development charges jumped to the top of the list of concerns for new home builders in the 2010 survey. About a third reported it as a critical problem, nationwide, almost two-thirds in Ontario. Rising costs due to serviced lot prices was also high on the list in most regions, 35 per cent in Ontario.

Two-thirds of new home builders expect that single-detached house prices will increase over the year.

CHBA renovator members expect increased activity for the second straight year but are increasingly concerned about losing work to the underground economy. Respondents were asked to estimate the proportion of new home building and renovation work in their market area that was undertaken on a “cash deal” basis, without paying taxes. These low-cost loans should lower the cost of borrowing for municipalities and can be used to fund the municipal contribution for cost-shared federal infrastructure programming.

Sixty-seven percent of the respondents estimated that more than half of all small repair jobs were lost to the underground economy. Forty-two per cent estimated that the same number of renovations costing $5,000 or less were lost. Sixty-five per cent estimated that about a third of small renovation construction activity in their market area was being done on a cash deal basis. Cash deals were believed to be less common for renovations costing $20,000 or more. Work in the underground economy was believed to be more prevalent in Ontario and British Columbia for all sizes of renovations and repairs and in Quebec for new home building.

About the Pulse Survey

The 43rd Pulse Survey of new home builders and renovators was conducted by the CHBA in December 2009 and January 2010 with the assistance of Canada Mortgage and Housing Corporation (CMHC) and Natural Resources Canada. A total of 387 new home builders and renovators responded to the survey. Results were tabulated and analyzed for the CHBA by Altus Group Economic Consulting