City’s fee proposal on new homes may boost resale prices

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This article was published 23/08/2016 (3368 days ago), so information in it may no longer be current.

Owners of existing homes could be among the winners if the City of Winnipeg imposes a new growth-development fee of up to $30,000 on new homes built in the city.

Two Winnipeg Realtors Association officials — president Stewart Elston and residential market analyst Peter Squire — say if new houses become too expensive for some move-up buyers, they’ll either stay in their current residence or buy a resale home instead.

Either way, “It will tighten up the supply and create a higher demand for these homes, and therefore we will see some higher prices,” Squire predicted. “I can’t say it will be all across the board, but certainly it will affect resale house prices, in my view.”

Elston said history has shown when the cost of new homes goes up, the value of existing homes rises along with it.

He and Squire said it’s hard to say how much resale-home prices might rise, adding it would likely vary from property to property and neighbourhood to neighbourhood.

“I wouldn’t say every resale home is going to go up by 30 grand, but there will be a bump in value,” Elston said. “That is safe to say. One will cause the other, no question.”

Mayor Brian Bowman favours a new fee on new developments, saying taxpayers can no longer afford to cover the costs new suburban developments place on city services.

The city hired Hemson Consulting to prepare a report that looks at the cost of projected city services over a 25-year period, how much of those costs can be attributed to development growth and how other municipalities have coped with growth-related costs. One of the proposals — and it’s just a proposal at this point — being discussed is the introduction of a new growth-development fee that would add $20,000 to $30,000 to the cost of a new residential lot in the city.

Jino Distasio, director of the University of Winnipeg’s Institute of Urban Studies, said resale homes in the more popular neighbourhoods in the city could see the biggest bump in property values if the cost of a new home increases by that much.

“In some of the more desirable neighbourhoods, we’ve already seen a real intensity in activity in the resale market,” he said. “So one would expect some of the traditionally hot neighbourhoods to remain hot or maybe get even hotter.”

John McCallum, an economist at the University of Manitoba, agreed a big increase in the cost of a new home could increase the demand for existing homes and push up prices.

“But I think the housing market is much more influenced by the fact that we’re getting to the point where the debts of a lot of new-housing buyers are very, very large, and the housing sector is kind of losing steam. And the financial institutions are getting tighter on the terms in which they lend,” he said. “So all of that will have more to do with pricing than this. But it’s a point.”

Elston said while owners of existing homes could benefit, there’s also a big downside to any big increase in the cost of housing, whether it’s new homes or resale homes.

“It makes it harder for people to buy homes, particularly first-time buyers,” he said.

‘ …There will be a bump in value. That is safe to say. One will cause the other, no question’– Winnipeg Realtors Association president Stewart Elston

He also noted while move-up buyers might get more for their home, they’ll also likely have to pay more for the next one they buy.

“So it’s going to stress a lot of different aspects of the home-buying public.”

He and Squire said they can’t understand why the city would consider introducing a new fee that would drive up the cost of a new home by that much.

“The number of new units being built in the City of Winnipeg will take a huge dive,” Elston said, echoing recent comments from officials from the province’s home-building industry.

“Eventually, it may come back,” Elston said, “but that’s just such a huge amount to tack onto the cost of a new home that they’re just going to push development outside the city. It’s just so counterproductive to what they’re trying to do.”

“We’re already seen that in the capital region,” Squire added, noting sales of single-family homes in communities outside the city, such as Headingley, Oak Bank, Oak Bluff and LaSalle used to account for 17 per cent of all MLS sales. Now they account for 25 per cent of them, and in February it climbed as high as 28 per cent.

“That’s the highest I’ve ever seen it,” he added. “What will happen is (they) will just accelerate that trend.”

murray.mcneill@freepress.mb.ca