Oakville homebuyers purchased at their own risk, housing minister says

A group of buyers in Mattamy Homes’ Preserve development say provincial measures to cool the Toronto-area housing market have placed them in financial peril. But Queen’s Park offered no assistance on Thursday.

Credit: RICK MADONIK / TORONTO STAR

 

Ontario Housing Minister Peter Milczyn says he doesn’t know how many homebuyers have been financially imperilled by the plunge in the Toronto real estate market following the introduction of the foreign buyers tax last April.

“I’m not aware this is a massive problem,” he said on Thursday.

Milczyn, who wasn’t in the housing portfolio at the time, said Queen’s Park would have done a broad analysis of the potential fallout from the tax, part of its Fair Housing Plan, which succeeded in cooling the region’s white-hot housing market.

“But as far as I know, (the government) didn’t drill down into calculating a number of individuals who might be impacted,” he said.

Milczyn was among those who expressed sympathy but offered no assistance Thursday to a group of Oakville homebuyers who say they are part of a much larger cohort of purchasers, caught during an extraordinary real estate cycle. They say they are on the brink of not being able to close on their pre-construction home purchases and fear they will be forced to forfeit hundreds of thousands of dollars in deposits.

They also worry that if they don’t close, they will be sued by the builder.

The buyers say the drop in the region’s real estate sales devalued their existing homes far below what they expected when they bought in Mattamy Homes’ Preserve development in February 2017. There are at least 100 other buyers suffering similar distress, said three couples who were interviewed by the Star.

In addition to declining property values, their dilemma has been compounded by new mortgage stress tests that took effect nationally in January, qualifying them for smaller loans than they would have been able to access a year ago.

“We’re looking for some sort of solution to help us out, however creative that can be … We’re open to anything that can really help us in our situation. We’re not looking for a handout,” said buyer Claudia Evans.

Some houses in Mattamy’s Preserve sold for more than $2 million. The buyers who spoke to the Star paid between $1.2 million and $1.6 million, sums that were about the same as the prices they expected to get for the homes they already owned. The three couples all said they planned to live in their new homes with their young children.

The average price of a new-construction Toronto-area detached home in February 2018 was $1.22 million. A year earlier it was about $1.5 million.

On Thursday, politicians and builders said that the buyers should have known they were at risk when they signed contracts with a builder.

“The government is not here as a backstop for real estate transactions gone bad,” said Milczyn.

The foreign buyers tax was introduced because there was a sense that people from outside Ontario and Canada were bidding up the price of homes, shutting Toronto-area buyers out of the market, he said. The 15 per cent non-resident speculation tax has reduced the number of offshore transactions in the province.

“To me that means the policy was successful in giving more Ontarians a fair shot at buying a home,” said Milczyn.

In the month after the tax was introduced, government data showed less than 5 per cent of real estate deals in the Toronto and Golden Horseshoe area involved foreign buyers. That’s about the same number the Toronto Real Estate Board reported prior to the tax’s introduction.

Building Industry and Land Development Association president Dave Wilkes, who represents homebuilders, said developers are also subject to economic forces, government regulation and demand, but the businesses have to meet their commitments.

“The industry is sympathetic to the hardships changing conditions will place some new homebuyers in,” he said. “The housing industry is a cyclical one. When you buy a new home that is going to be completed several months down the road, unfortunately situations can change, whether that’s the value of the current house that you have, if you are indeed looking to sell, employment conditions — there’s all those types of things that can happen.”

Oakville Mayor Rob Burton has written to Mattamy on behalf of the buyers, asking if the company can offer some concessions that it has allowed in other developments.

“What (the buyers) are saying is they’re looking at all of their hopes and dreams being dashed and it’s got to be a very tough place to be for people,” he said.

But it’s not the government’s problem. “This is a private matter,” Burton told the Star.

In Mattamy’s Queen’s Common community in Whitby, where the builder dropped its prices following the decline in real estate sales, buyers were allowed to increase their deposits to reduce the price of the house by an equal amount.

Asked if that was a possibility for Oakville, Mattamy said the company deals with individual communities differently.

“We’ve decided going forward that the best approach continues to be dealing with customers on a one-to-one basis, which is the same way that they bought from us,” said Brent Carey, vice-president of communications for Mattamy.

“If we can assist our buyers within the contractual boundaries that we both signed on for, we explore that with them individually. We have been and will continue to be willing to meet and work with our customers one on one, within the boundaries of the agreement, in an effort to where possible provide individual solutions.”

RBC reported on Thursday that Canada’s overall housing affordability improved in the fourth quarter of 2017 for the first time in more than two years, mostly as a result of the slow Toronto market. But it cautioned against popping champagne corks, “unless you think allocating 75.1 per cent of a household’s income to cover ownership costs is acceptable.”

“That’s what a typical Toronto-area household would need to allocate if it were to buy an average home at today’s prices and interest rates,” said the bank report.

The reprieve is likely to be short-lived because the Bank of Canada will hike its rate again before the first half of 2019, said RBC.

Source :

Toronto Star

Be the first to comment

Leave a Reply

Your email address will not be published.


*


eleven − 10 =