Rebound?

Kyle DenOuden of Hickory Homes is building this new home on West Lake in Wellington.

New home starts rise steadily since hitting bottom in 2012

Quietly, incrementally—but steadily— the market for new homes is on the rise in the County. It is welcome news for the builders, developers and trades, service and material providers who rely on this sector for their livelihood. It is good news, too, for the municipality, whose revenue is derived from property taxes, user fees and an expanding array of development fees. But is it real? Is it sustainable? A lot is riding on the answer.

The previous decade saw robust growth in homebuilding, until global credit markets seized in late 2008. Boom turned to bust. Fewer new homes were built with each passing year—fewer basements dug or additions added. The County hit bottom in 2012, when just 69 homes were built—less than half the number of starts recorded in 2007. But since 2013, the number of new homes built in the County has been on the rise.

This year homebuilding is on track to surpass 100 new single family dwellings. The last time the industry built that many homes was in 2009. Not earth-shattering growth—but growth nonetheless.

Not everyone is persuaded that a discernable trend has formed, or that residential housing market is is rebounding. Graham Shannon heads Sandbank Homes currently the only developer building new homes, in Wellington and Picton.

“We had a better year than last year,” says Shannon, “but not sensational. Some of this is cyclical to available lots. I honestly don’t know what to expect over the next 12 months.”

The average building permit is up sharply in 2015 compared with the same period last year. In the first nine months of 2014, the average value of the work underlying a building permit in the County was about $60,100. This year the average value of a County building permit has jumped to $99,800—a 60 per cent increase.

Much of this increase is due to five large commercial projects: the new Picton Firehall; the addition to the Manor on Loyalist Pkwy; the 88-unit apartment building on the McFarland Home property; the Tim Hortons and McEwen’s gas bar in Wellington and the new LCBO in Picton. These projects have a total work value of $19.9 million.

“It’s a healthy market,” said Eric DenOuden, head of Hilden Homes. He is the past president of the Ontario Home Builders Association and Quinte Home Builders Association. “Not our best year—but a good, healthy year. Overall, my colleagues are having good years. Most of us are content with the market right now. It is good for both the buyer and the seller in the Quinte area.”

DenOuden predicts a continued but modest up ward trend in the County’s homebuilding market. His company is doing more in this market than he has in a decade, but he says the combination of limited demand and high cost of development will likely continue to constrain growth of the building market.

He worries about the long term effect of fewer and fewer affordable homes for first-time buyers in this community.

“There is not a lot of selection for young couples in the County,” says Den Ouden. “When there is something available, the law of supply and demand, coupled with the high cost of development in the County means the price is out of reach.”

Sandbank Homes’ Shannon adds that County has the most aggressive development and connection charge structure in the region—even after the 50 per cent discount to development charges in place over the past few years. That discount is set to expire in March.

Meanwhile, three large-scale developers continue to sit on tracts of land targeted for development. DenOuden says these developers don’t yet see the volumes sold in the County to justify further investment.

“They only know how to do big developments,” said DenOuden. “They are not used to developing in a market that can only absorb 10 or 20 homes a year. If they can’t blow out 50 to 100 homes a year, it doesn’t make sense to them.”

But DenOuden admits this thesis hasn’t been tested for a few years.

“Nobody has tested the market in the County recently,” said DenOuden. “It is a high risk market. And no one has stepped up to take on that risk yet. I wish they would develop it. Wellington, and the County, need it badly.”