Calgary’s sluggish economic recovery will keep housing start numbers and prices in the city mostly static in the coming two years, said a federal real estate monitor.
A glut of housing will rein in growth in the sector, said the Canada Mortgage and Housing Corp. report.
“With elevated levels of completed and unabsorbed inventory, housing starts will remain flat in Calgary,” said the CMHC’s Housing Market Outlook for 2019-20.
An overabundance of apartment units will play the largest role, it added.
And while a slowly improving economy should fuel an influx of new residents and boost housing sales in the next two years, “the average MLS price will continue facing downward pressure but is expected to stabilize in 2019 and modestly rise in 2020.”
Calgary is still recovering from a deep recession that hit four years ago with the collapse of energy prices, with the city’s unemployment rate of around eight per cent among the highest in Canadian cities, noted Anne-Marie Lurie, chief economist with the Calgary Real Estate Board.
“Sales activity has remained quite slow, a lot lower than anticipated — we’ve pulled back quite a bit,” she said, adding some of those in the industry were expecting an unemployment rate closer to six per cent.
“We just haven’t seen a pick up in our economy, in fact we’ve had job losses in the past two quarters.”
While oil prices in general have recovered, the discount in the price differential hitting western Canadian oil has been steep and investment in the industry lagging, which is being felt in the city’s housing market, said Lurie.
“Those impacts are going to continue into the next year,” she said.
As of last September, there were 2,087 unsold homeowner and condominium units in the greater Calgary area, while 7,630 apartment units were under construction, a 32 per cent increase from the previous year.
“Given the current level of inventory and units under construction, it is anticipated that total housing starts in 2019 and 2020 will be similar to production in 2018,” said the CMHC.
Some of that overbuilding, particularly of apartments, can be explained by the longer-term planning that goes into them, said Lurie.
“Some of that stuff was planned before the slowdown happened and a lot of that takes a long time to build,” she said.
“There was also some expectation about what our growth would look like in the future.”
Home builders, she said, have been more aggressive in their pricing in newer subdivisions, which increases competition with property resalers represented by CREB.
The CMHC forecasts high-range resale home prices that averaged $466,500 this year to inch up to $470,100 in 2019 and $475,500 in 2020.
MLS sales in Calgary have fallen 13.5 per cent from September 2017, though better employment and economic conditions should strengthen demand, says the CMHC.
“However, it will take time for the market to transition to conditions that are more balanced,” said the report.
Lurie said the report’s prediction that vacancy rates should come down are already being confirmed.
There have been some increases in occupancy in recent months, she said, that have also been aided by federal mortgage policies.
“It doesn’t surprise me when you see more stringent lending conditions that tend to favour people remaining renters,” she said.
Another factor keeping the Calgary market afloat, she said, is an influx of newcomers to the city reflected in the most recent city census released last July.
It showed a net migration of 11,588 people, a significant turnaround from the preceding few years that either showed meagre gains in the hundreds to a net loss of 6,527 people in 2016.
on Twitter: @BillKaufmannjrn
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