Melfort council is being tasked with creating ideas to ensure residential home development continues to stay ahead of provincial numbers.
Every spring, local administration staff, contractors, property owners, land developers, and realtors discuss the housing market and issues surrounding the industry. During a special council meeting on March 15, community development manager Brent Lutz brought a report from an April 2017 stakeholder meeting to council looking for suggestions from members to keep Melfort viable in both speculative home builds and custom housing construction. In 2006, 76 new homes were built in Melfort, in 2016 that number slouched to 12.
Lutz told northeastNOW a day after the meeting that finding a balance between speculative homes and custom construction is a tricky issue for council and administration. He said having a stock supply of those homes is good for the city.
“If you are coming to Melfort and you are in the market for a nice new house there is something about being able to walk into a home sitting there ready to go as opposed to buying someone else’s that you get possession of two months later and need to make repairs on,” Lutz said.
The number of speculative homes on the market has diminished due to several factors. The addition of a provincial sales tax on construction labour, higher trades costs and increases in the prices of lumber. Lutz said those factors are not controlled by the city. He said changes to a few land sales requirements could possibly increase development, but drastic measures can’t be implemented.
“If you drop the value of lots in a market place where people have recently bought lots and built homes you drop the value of their home. We don’t want to manipulate that in the fear of harming recent buyers,” he said.
In 2016, the latest numbers the group had available at last spring’s meeting showed Melfort realty listings and sales were also twice the provincial average with 60 per cent of listings selling when on the market. Lutz said the city now must decide how deeply they need to be involved to sway the numbers.
“Can we or should we get involved and manipulate the market? Is the market best left to itself? I think there is times you want to see growth or development and make it more attractive,” Lutz said.
Concerns on speculative development prices
Ryan Tremblay owns a construction business that builds new homes, and services lots in the city. He said several factors have changed his business angle from five years ago.
“Every year the city increases lot prices, the trades prices go up, add in the PST, there’s not a lot of room left for spec houses. People are building what they want, and they don’t mind spending a little more money but to just build a spec house the margin has been eaten up,” he said.
The downfall of speculative houses for developers is the upfront land purchase cost, the building price as well as insuring the building until a buyer takes over. The city of Melfort is now instituting a development levy. The cost for a residential home lot is just under $1,200 per front metre. That fee covers on site infrastructure like water lines and utilities. Tremblay said the cost is necessary, but he’d like to see a break elsewhere.
"I agree they need a development levy but for right now, the lots are cheaper. But I think the lot prices need to be lower,” Tremblay said.
Large lots come with higher cost
Melfort-based realtor Richelle Rogers was also present during April’s meeting. She said new mortgage rules put in place by the federal government have her more concerned rather than factors controlled by the city. She said first-time home buyers now need to qualify for a mortgage two per cent higher than the current interest rate. She said buyers will still purchase a home but routinely can’t spend what they want.
“You might not get the double garage, you might get the single garage. What does that do to the higher end homes which is what our new builds are? Will you build or go and buy a 30-year-old home that needs a paint job? The higher end homes are what is going to suffer,” she said.
Thirty new home builds is the suggested rate to keep up with growth according to the City of Melfort. Rogers suggested the sizing of lots needs to be adjusted. She said the cost is the same to service a lot whether it’s 70 feet or 35 feet, but the development fee would be less for buyers and developers. She said reducing the size also has downfalls for potential new residents.
“Instead of selling bigger lots we could go smaller but in a smaller town that is one of our advantages. People from the city love our large lots, it would be great to continue to offer them,” she said.
Rogers said more affordable spec homes is an option, as well as promoting the overall lifestyle of living in Melfort to help boost development.
No concrete plans were brought forward by council members at the special meeting. The stakeholders will meet again this spring to discuss the 2017 numbers and search for more resolutions and options for the industry.
On Twitter: @ClarkStork
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