Home buying cheaper in St. John's — unless you want a condo
When money problems shut the doors last week on a major property developer in St. John's it was not only a sign that it's no longer in business. It's the sign of a construction market that's been in decline for years.
The Future Group, with five companies such as Skymark Contracting and Skymark Rennovations under its umbrella, applied for protection from its creditors, citing liabilities of $20 million.
In 2011 Skymark Homes called itself the largest residential builder in the province.
The party is over when it comes to new home construction in the St. John's metropolitan area and what a party it was — a seven-year boom that began in 2007.
"Housing starts went as high as 1,485 for single detached homes in 2008 — That was a record," said Chris Janes a senior market analyst with Canada Mortgage and Housing Corporation.
"We've seen that trickle down to under 1,000 [homes] in the last three years," he said.
Last year starts fell to late 1990's levels.
Economy down due to low oil prices
"The price of oil is a key contributing factor, obviously, we are an oil based economy," said Janes.
In the past few years, he said, some key economic indicators started to flatline or show declines.
Employment was one of them.
Job numbers have been trending down for a couple of years, Janes said, with employment growth flattening in 2016.
"As mega projects like the Hebron GBS in Bull Arm get clewed up, people are displaced, have to find work and that's a contributing factor to the provincial employment number," Janes said.
New builds now in line with demand
At one point a record number of finished houses sat empty, but were eventually sold when prices went down.
There were 419 homes advertised on the real estate multiple listing service in June 2014, compared to 171 in April 2017.
"New home building and inventory now is gone back in line with demand," Janes said.
He adds there are few contractors building without a buyer in place.
"Some larger operators are still involved in that, and are being successful, but overall is too risky in this environment for the average builder or the smaller-scale builder to do that," said Janes.
Government polices aren't helping
The home builders' group in this province says government polices aren't helping the downward spiral in new home construction.
"Like the increase in the HST, back in July, as well as the mortgage rules," said Victoria Belbin, CEO of the Canadian Home Builders' Association in Newfoundland and Labrador.
"Two of these significant changes brought on by government have really made it a challenging environment for our members," Belbin added.
"We are having conversations with governments to ensure that they understand when they put policies and measures like these in place, it has an impact on first time home buyers and seniors," she said.