Toronto and Vancouver have some of lowest vacancy rates in Canada, CMHC finds
Canada has avoided the kind of housing crashes that has bedeviled countries for decades thanks to government regulations to tame soaring home prices, according to the largest closely held home builder in North America.
“We’re right in the midst of a soft landing, certainly something that we predicted and actually helped influence,” said Brad Carr, chief executive office of the Canadian division of Toronto-based Mattamy Homes Ltd. “It was necessary. The market here was running a little hotter than we thought it should for the long-term health of the market place.”
Various levels of government instituted regulations to cool markets, including a foreign buyers tax and stricter mortgage lending rules after home prices surged 60 per cent in Toronto and about 70 per cent in Vancouver in the past five years. The housing market has cooled dramatically since the latest rules were implemented in January, though prices and sales have since stabilized.
Now builders across the country, including Toronto-based Mattamy Homes, are lobbying for a pullback of the tougher mortgage regulations, including one that ensures prospective buyers can meet mortgage payments at interest rates 2 percentage points above the contracted rate. “It’s been achieved so it’s kind of overkill now,” Carr said. Rising interest rates are now doing some of the work for the government, he said.
Peter Gilgan, founder and CEO of Mattamy Homes, was one of the people who lobbied for regulations to prevent speculative buying in the market last year.
“I’ve seen too many hot air balloons before: the higher they go, when they burst, you don’t survive the landing very well and what you end up doing, is you end up disenfranchising a whole generation of young people, a whole decade of chaos,” Gilgan said.
Gilgan understands the damage that a popped housing bubble can create: he went through the crash of the Canadian housing market in 1989.
“I was in the ’80s when I paid crazy prices for land,” he said. “It stopped very abruptly in April of ’89 and I was eating land for the next six or eight years. It was hard to swallow because it was worth way less than I paid for it and I just had to work my way through that.”
Mattamy Homes expects to see another 30 per cent unit sales growth in U.S. next year after about that this year, Gilgan said. The company, which has built about 90,000 homes in North America, has built about 3,000 units south of the border this year, compared with about 4,500 in Canada.
The Canadian business will role on a “more controlled base.” Gilgan expects the U.S. business will catch up to Canada’s in the next three to four years, with a target of about 5,000 units a year in both countries. Mattamy’s primary markets south of the border are Florida, Arizona and the Carolinas