New Home Construction Canada

Part
01
of two
Part
01

New Home Buyers Experience

INTRODUCTION

Buying a new home over an old home is becoming increasingly popular in Canada. Over 33% of the homes sold in Canada are new homes which buyers generally prefer due to factors like lower maintenance costs, higher quality of material used etc. While buying a house most of the people are motivated by their financial stability and their desire to stop paying rent. Over 52% of respondents in a survey by Leger preferred places near green spaces and 49% preferred places near their work places. The process for buying a home is lengthy and requires the determination of financial stability, getting a mortgage pre-approval, looking for houses and negotiating and closing the deal. During the process, people face a lot of difficulties including imposition of government regulations, hidden costs, lack of knowledge about contracts etc. which have been examined in detail in the report. Despite this, the number of respondents who feel that they can buy their own home has increased to 55% from 46% in 2017.

NEW HOMES OVER OLD HOMES

Nearly 33% of all homes sold in Canada are new and more than 52,500 buyers preferred buying new homes to old ones in Ontario alone. There are a lot of reasons for the preference like greater flexibility in customizing the home as per individual tastes, higher energy efficiency ratings which mean lower utility costs, better building materials translating into higher levels of safety and quality and lower maintenance costs as a whole.

PRIORITIES WHILE BUYING A HOME

People keep in mind a variety of factors while deciding which house to buy including size, location, neighborhood etc. According to a survey by market researcher Leger, over 52% of respondents prefer homes near green open spaces, 49% gave preference to proximity to work, 43% to proximity to retail stores and 35% to proximity to public transit. The least popular preferences were proximity to restaurants (21%) and proximity to community centers (19%).

For most people the decision to buy a home depended on their financial stability, their need to buy a bigger place due to family expansion plans, and their desire to stop paying rent and own their own home. Even interest rates were not the primary factor in the purchase decision if all their other needs were being met. Low interest rates were considered a bonus but high interest rates were not a deterrent.

THE PURCHASE PROCESS

STEP 1: The first thing to do before buying a house is to determine if home ownership is the right choice. Pros and cons of owning a home versus renting a home need to be analyzed and 5 questions need to answered. Are you financially stable and have the required financial management skills to manage the purchase? Can you take the responsibility of all the costs associated with owning a home and can you devote enough time to maintain your home? Finally, are you new to Canada? The answers to these questions will determine if a person is ready to buy a home.

STEP 2: The second step towards owning a home is to analyze your financial situation. It is very important to ensure financial stability before deciding to make a big purchase. There are 2 rules to determine the amount of money a person can spend on housing.
A. The housing costs per month are under 32% of gross monthly income.
B. The debt obligations including mortgage of a month are less than 40% of gross monthly income.
Various other costs need to be calculated before deciding on the soundness of financial stability like the upfront costs (includes the down payment, home inspection and appraisal fees, insurance costs, land registration fees, legal or notary fees, moving costs, repairs or renovations if any and GST/HST/QST on a newly built house), the monthly spending with the added costs of home ownership and lastly the credit score.

STEP 3: The third step is to initiate the mortgage pre-approval process. A mortgage pre-approval helps narrow down the house search by providing an idea about the affordability, the likely interest rate and indicate the kind of monthly installments on the basis of the documents that are submitted. These include government issues photo-ID, contact information of employer, address proof, income proof, down payment proof, savings and investments proofs, details of current debt obligations and the person's credit score.

STEP 4: After all the preliminaries are completed, it is time to look for the perfect home. All the factors like size of home, location, proximity to place of work, neighborhood etc. need to be kept in mind. The decision to buy a new home or an old one is also made in this stage. It is essential that long term requirements are kept in mind while deciding to purchase a particular home. Real Estate Agents and other professionals like lawyers are enlisted to help with the negotiating and buying process.

STEP 5: The final step of the process is making an offer and closing the deal. After deciding on the house, the process of negotiations start and an offer is made that should include all necessary conditions before that need to be met before the contract becomes binding. Once the offer is accepted, it is time to complete the financing documentations by providing details of the property, tax assessments and home inspection report etc. After all the legalities are taken care of, the lender provides your lawyer with the money, who then pays the seller, registers the home in your name and provides you with the deed as well as the key to the house.

CHALLENGES FACED WHILE BUYING
Buying a house is deemed to be an extremely stressful process according to a survey by Mortgage Professional Canada. Toronto has been found to have the highest levels of stress followed by Vancouver. The lowest levels were in Atlantic Canada and Quebec. The stress was associated with a variety of factors including the buying decision, financing, etc. The buyers also face a lot of challenges while buying a home. These include:

1. Hidden Costs — Buying a home has some other associated costs that need to be kept in mind. For example:
Deed Transfer Tax which is a mandatory tax and each Nova Scotian municipality sets its own rate.
Legal Costs which can range from anywhere between $800 to $1500.

2. Government Regulations — A lot of new government regulations are introduced that pose as challenges for people wishing to buy their own homes. For example, the recent "stress test" employed by OFSI, which requires home buyers to prove that they are financially qualified by showing that they can pay higher interest rates. It can either be 2% over the rate they qualified for or over the 5-year mortgage average in Bank of Canada. According to a survey by market researcher Leger, about 25% of buyers compromised on the size of the home, 18% on the location, 17% on the style of the home and almost 33% decided not to buy a home altogether.

3. Emotional Attachment — A lot of people find it difficult to separate the emotional aspect from the home buying experience, which eventually leads them to make irrational decisions. It is essential to first evaluate the finances part before deciding to buy a house.

4. Lack of knowledge about contracts — While buying a home, a contract is signed between the buyer and seller which contains all the conditions and requirements that need to be abided by. Often when people sign these contracts without getting legal consultation, they run the risk of entering into contracts with fine print containing clauses they might not understand or agree with. Therefore, this lack of legal knowledge makes it imperative for people to enlist a lawyer for overseeing the paperwork.

5. Lack of knowledge about seller's tactics — Often people like the house being shown so much that they move to immediately close the deal. But more often than not, these show houses have upgrades which are additional costs to the buyers. It is important to be aware of these costs before deciding to buy the house. When buyers are buying a house based on brochures or sales material, many a time, the floor plan includes the size of balcony and bathroom. In these cases buyers enter into contracts misguidedly and there is nothing much that can be done about it afterwards.

Despite the challenges faced by the people, the number of people who feel that they can buy a house that meets their needs has gone up to 55% from 46% last year according to the survey by Leger.

CONCLUSION

Over 33% of the homes sold in Canada are new homes which buyers generally prefer due to lower maintenance costs, higher quality of material used, greater flexibility in customizing and higher energy efficiency ratings. Over 52% of respondents in a survey by Leger say that they prefer their houses to be near green spaces and 49% vote for proximity to work place. Interest rates are not the biggest motivators for buying homes for almost all the people. The process for buying a home is lengthy and requires the determination of financial stability, getting a mortgage pre-approval, looking for houses and negotiating and closing the deal. During the process, people face a lot of difficulties including imposition of government regulations, hidden costs, emotional attachment to homes, lack of knowledge about contracts as well as seller's tactics. Despite this, the number of respondents who feel that they can buy their own home has increased to 55% from 46% in 2017.
Part
02
of two
Part
02

Home builders Ontario

Ten of the top new home builders headquartered in the Province of Ontario, Canada according to annual revenue are Minto Group, Vandyk Group of Companies, Fairgate Homes, Fusion Homes, Mattamy Homes, Geranium Corporation, TAS Designbuild, Fieldgate Homes, Caliber Homes, and Mason Homes. The details for these home builders have been entered on the attached spreadsheet. My methodology and an overview of my findings are below.

Methodology and limitations

To identify ten of the top new home builders in Ontario, Canada, I began by searching for a pre-compiled list with measurable criteria. I was able to find a list of home builders operating in Ontario, but they were not ranked or organized in any manner. Therefore, I researched each company's annual revenue using annual reports (where available) and reputable business listing sites such as Owler, Manta, and Zoom Info. This list included 109 home builders operating in Ontario, and while I was able to find estimated annual revenues for 76 of these companies, there are still 33 of them that have not disclosed any type of financial information. I believe this is because they are all private companies that are not required to publish their financial data.

However, I also believe that these 33 companies are not likely to have revenues that exceed the top 10 companies on the list because in general, estimated revenues are available for larger companies via third party business listing sites. So, while I cannot say for certain there isn't a company with "N/A" on the list that could have a top 10 revenue, I am confident that isn't the case. You will find the revenue data (where available) for these 109 companies on the second spreadsheet.

Once I had the revenues for the majority of the companies from the pre-compiled list, I began searching each company's website to exclude those that do not build single homes. For this reason, there are several companies that have higher revenues than the companies that ultimately made the top 10, but these companies only build condominiums and townhouses.

In addition, it was unclear whether the top 10 companies should include only those companies headquartered in Ontario or if they should also include companies that are operating in Ontario, but are headquartered elsewhere. Fortunately, just one company that would have been in the top 10 is headquartered outside of Ontario. This is Concord Adex, which is headquartered in Vancouver, British Columbia, but is an active home builder in Ontario as well. I elected not to include it in the top 10 list, but did provide the requested information for Concord Adex as the 11th company. However, if it were to be included in the top 10, it would appear at number four on the list according to revenues.

The number of homes constructed in 2017 or any year earlier was not available for any company on the list. Again, this is likely due to the fact that they are private companies and not required to release such data. I was able to find information on the total number of new homes built for seven of the top 10 companies, and for eight companies overall, but Vandyk Group of Companies, TAS Designbuild, and Caliber Homes did not provide any numbers at all.

Unless the website specifically stated the number of years in business, this number for each company was calculated by subtracting their founding date from 2018.

All revenues are estimated, since all companies are private and not required to disclose their financial information. However, we have used reputable business information databases to provide estimated revenues for purposes of ranking.

Results

Based on annual revenue, 10 of the top new home builders in Ontario, Canada are:


All of the above companies are headquartered in Ontario.

Concord Adex is headquartered in Vancouver, British Columbia, but is actively building houses in Ontario. Its annual revenue is $32,900,000 and would be the fourth company on the list if included in the top 10.

Conclusion

The name, website, years in business, annual revenue, and total number of homes built (where available) for 10 of the top new home builders in Ontario, Canada have been entered on the attached spreadsheet.
Sources
Sources

From Part 02