With more homes being built on the horizon in Calgary, economists are optimistic about what’s to come. According to real estate insider like Mario Toneguzzi, it’s a buyers market right now in Calgary. It’s great news for potential homeowners with the rise of inventory about to hit the market. More from Mario Toneguzzi below in August’s Condo Living Magazine:
Housing starts until the end of May had climbed to positive levels in almost every residential category but perhaps more importantly the signs of economic recovery in the city were buoying the mood of everyone about the future — although still at a cautiously optimistic level.
Lai Sing Louie, a regional economist with Canada Mortgage and Housing Corporation, says there was an overall sense of optimism based on employment levels rebounding where they were back in 2014 just before the economic downturn began as a result of plummeting oil prices in the second half of that year.
Oil prices are now up and so are the spirits of the province. Population has grown and net migration is turning positive again as people from elsewhere are moving to Alberta because of the brighter economic picture.
All those positive signs are supporting housing demand.
“There’s a lot of condos under construction,” Louie says. “In terms of supply levels, that’s going to give buyers more choice and probably keep prices steady right now.
“We have the market classified as favouring the buyer right now. This additional supply will offer consumers even more choice at a competitive price . . . In this type of marketplace you’ve got to put product on that’s competitive, otherwise it will sit there for awhile before it’s sold . . . But the apartment inventory has been coming down. That’s why you’re seeing more apartment construction.”
According to the CMHC, year-to-date until the end of May, there were 4,912 housing starts in the city compared with 4,135 for the same period in 2017.
Year-to-date starts by housing category and 2017 numbers in brackets are: single-detached, 1,652 (1,571); semi-detached, 466 (414); row, 594 (654); and apartment, 2,200 (1,496).
Year-to-date until the end of May, there were a total of 11,298 new homes under construction broken down in the following way: single-detached, 2,422; semi-detached, 784; row, 1,228; and apartment, 6,864.
The future does indeed look good for the Calgary market.
In its Metropolitan Outlook, the Conference Board of Canada said an improved oil price in 2017 helped Calgary’s real GDP post a 6.9 per cent gain, following two annual contractions in the mid-three per cent range prompted by oil’s 2014 price collapse. These dips were the first back-to-back contractions since at least the late 1980s and inflicted considerable economic pain.
“Last year’s strong rebound was accordingly welcome, although we estimate it did not quite recoup the two real GDP losses. That task will be accomplished this year, as we expect Calgary’s real GDP to expand 2.5 per cent, putting local real GDP at a fresh record high. A further 2.1 per cent increase is on tap for 2019. Our medium-term call is for real GDP hikes to average in the mid-two per cent range annually,” it says.
The conference board is forecasting total housing starts in the Calgary region to climb to 11,475 this year from 11,302 in 2017. Then it is forecasting slight growth annually for starts reaching 12,742 in 2021.
But despite all the positive signs, the conference board said construction firms will still be wary of the residential market.
“Although area housing starts rebounded to the mid-11,000-unit range in 2017, with both single-detached and multi-family activity increasing, this level was well off the 2014 peak of 17,130 units,” it said.
“Moreover, these starts occurred despite high builder inventories of unsold units. While backlogs of all unit types are high, those of apartment suites are particularly worrisome. Indeed, in December, CMHC data showed 1,208 unabsorbed apartments in Calgary and 6,030 unabsorbed apartments across Canada, meaning that one in five unsold Canadian apartments was in Calgary.
“This is clearly unsustainable. Two risks loom: that financially stressed developers will sell off their high inventories at below market prices and that individual condo owners who bought when prices were high will list their properties at the first sign of market improvement. Accordingly, we are anticipating little change in starts in 2018 and only a tiny increase in 2019, with risks to the forecast weighed to the downside.”
A report by the Altus Group found that homebuying intentions were down slightly overall in the Spring in Calgary.
“The dip was due entirely to more renters (the pool for potential first-time buyers) shying away from making home purchases, which may be related to a drop in rents making renting more affordable than ownership. Homebuying intentions are similar to a year ago among current homeowners,” said the report.
The Altus Group said many young renters want to buy a home but are still saving for a downpayment.
“Changes in mortgage lending criteria over the past year or so have made saving longer for a larger downpayment a necessity for many renters in order to be able to qualify for a mortgage,” it says. “The current economic situation is also a deterrent for many potential first-time buyers. Only one in six renters under 45 years indicates that they simply prefer the renter lifestyle.”
The Altus Group survey also found that being deep in the downtown action has appeal for a segment of the Millennials – those currently under 35 years old. But they are in the minority. Only one in five people, in this age group, responding to the survey agreed that they would prefer living in a rental or condo apartment in downtown Calgary to a single-family home in the suburbs.
Also, the Altus Group report found that one in two end-user homebuyers in the Calgary market in the past five years was a first-time homebuyer, which was similar to the overall average for Canada.
“Immigrants to Canada are an important segment with one in three end user homebuyers in recent years having been born outside Canada. About one in four homebuyers was a single-person household,” added the report.
Here are some of the other key highlights from the Altus Group report:
• New multi-family sales ended their slide in 2017 totalling 2,970 units, a 28 per cent improvement from 2016 but still below the recent peak of just over 5,400 units in 2013;
• At the end of the first quarter of this year, about 2,700 multi-family units were unsold, representing about 15 months of supply – an improvement from 18 months a year earlier and the peak of 22 months in the fourth quarter of 2016;
• There were 23 condo apartment projects launched in 2017 with a total of just over 1,600 units. The majority of the new supply has been in suburban locations and has seen fairly strong demand from consumers;
• Medium density land was the biggest contributor to Residential Land investment dollar volume in 2017 at $183 million, accounting for almost one-third of overall investment; and
• High density land posted the largest year-over-year increase in 2017 for residential land investment – more than five times to $128 million.
View the article online by Mario Toneguzzi for Condo Living Magazine.