The National Post has this update from Alberta. “Consumers in Alberta are now putting down deposits on housing lots without knowing what the final price for the finished home will be, in the latest example of the desperation for housing in the province.”
“The bizarre situation in which consumers are contractually bound to pay a final price yet to be determined has been going on for the past few months, said Allan Klassen, president of the Alberta chapter of the Canadian Home Builders’ Association.”
“‘That’s how people are securing housing now,’ said Mr. Klassen, adding the situation is being driven by demand for housing as opposed to greed from builders.”
“To combat price worries, builders are now willing to let consumers guarantee themselves a space in a development if they are willing to put a deposit on a lot. Mr. Klassen said that deposit can sometimes be about 20% of the value of the lot.”
“For that deposit, consumers are usually signing a contract that binds them to buy the house once it is completed. The final price is dependent on what type of costs the builder incurs. The prices rise as costs rise. The deposit contracts vary from builder to builder but Mr. Klassen said most builders are willing to let consumers have their deposit back if they are unhappy with the final price because the current market conditions are strong.”
“It’s a dangerous game for consumers, according to Brian Hollohan, manager of market analysis for CMHC in Calgary. ‘There are a lot of unusual transactions taking place and people are taking unusual measures to secure a home. It’s not something I would do,’ he said.”
“Consumers looking for more price certainty in the existing-homes market are out of luck. Kevin Clark, president of the Calgary Real Estate Board, said the average price of a home in the city was rising as much as $500 per day.”
“‘The resale market is quite insane,’ said Mr. Clark. Mr. Clark said it’s no wonder people are willing to put deposits on new homes without knowing the final price. ‘If they don’t there is another person right behind who will,’ he said.”
