In the middle of summer, when I learned that the price of the 2 x 4 had returned to normal, I thought buyers of off-plan homes and condos could finally sleep easy. That they no longer risked being asked for a substantial and unforeseen sum in the contract before delivery.
But no ! 70% drop in lumber prices in three months1 has not sounded the death knell for unpleasant surprises of this kind.
The Calex Group, which is in the process of building the Lumina condo project in the Rosemont – La Petite-Patrie district of Montreal, has just warned buyers that it is increasing the sale price of all apartments by 5%. Deliveries will begin in December.
For Marie Demers, who bought in May, this represents $ 15,000. An amount that she does not have, and that she cannot add to her mortgage, which is already at the maximum.
“I am completely panicked. I can’t sleep anymore, she told me a few days ago. My income is ultra-low, I have no leeway. It was complicated. I had to put my mother’s house as collateral to get the mortgage. Because even though I have a 20% down payment that comes from my father’s inheritance, I have nothing. I am an author and a lecturer. ”
The 35-year-old felt completely on her own. She called wherever she could for advice. No one reassured her. A lawyer graciously offered to write a letter to the Calex Group.
What seems very clear to me is that in justice, I would win. But there are damages in the meantime which are very serious. Not only for my sanity – I’m going crazy – but also for the person I’m supposed to hand over my lease to in January.
Marie Demers, owner of an apartment in the Lumina condo project
In writing, the president of the Calex Group, Benoit Soucy, justified this increase by the shortage of aluminum, steel and wood which “literally blew up market prices from 20% to 50%” and up to “200% in lumber”. He cites the example of the 2 x 4, the price of which went from $ 3 per unit at the start of 2020 to $ 14 “in the heart of the project’s work”.
Benoit Soucy assures me that it is not out of heart that he has adjusted his prices and affirms that his company is absorbing “the major part” of the cost increases, in addition to offering accommodation measures. Some customers have already accepted the increase, others are continuing discussions.
Last spring, I wrote two texts on this new phenomenon of price increases imposed during construction because of materials. No one had found a quick fix.
Read the column “The chaos of the price of materials” Read the column “New constructions: what are contracts worth?” ”
I contacted the Association de la construction du Québec (ACQ) to find out if this practice was still justified. If the price of lumber has melted, “other materials remain problematic,” spokesperson Guillaume Houle told me. Steel is 20% more expensive than three months ago, for example.
Since the spring, the ACQ has encouraged its members to add price adjustment clauses in their contracts in order to protect themselves financially. Without it, it is illegal, in theory, to charge a higher price than agreed upon.
But few entrepreneurs are still following the advice. Why ? “We are in a culture of fixed prices,” explains Mr. Houle. He still predicts that fixed prices will be less and less common in his industry in the future.
I would bet that the reluctance of condo and house builders also stems from the fact that a variable-price home is a lot less attractive to consumers. Everyone is in favor of transparency, but in this case, it would mostly cause insecurity.
Imagine a couple asking their financial institution for a mortgage on a house that could cost $ 325,000… or $ 400,000.
“We are not sure of the price, Mr. Banker. The contractor will fix it on the way, or maybe just before delivery. “
Not sure it would go easily!
But according to the ACQ, “banks will have to adjust to this type of market”. Because entrepreneurs can neither “have recourse to questionable practices to subsequently claim from their client, nor work at a loss”, says Guillaume Houle.
The story of Marie Demers also illustrates the risk of contracting a mortgage to the maximum of its repayment capacity. She is well aware of this. But after a few mishaps in an apartment and an inheritance, she wanted to “build a future”, having no pension plan. “Everyone told me it was a good investment. ”
In a twist, the morning the owner of Groupe Calex was to call me, he instead sent an email to Marie telling her to forget about the $ 15,000 price increase.
“It shows that we have to fight. All we read is that we are not protected. But those who want to give up must know that it is worth the effort, ”concludes the future owner.
1. Lumber futures contracts (Random Length Lumber) on the Chicago Mercantile Exchange Materials Exchange. Difference between the maximum price on May 10 (US $ 1,711 per 1,000 board feet) and the minimum price on August 20 (US $ 448).