Calgary region housing starts to fall 23% this year

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Housing starts in Calgary, as well as sales and prices in the city’s resale market, are all expected to decline this year, according to a new report from the Canada Mortgage and Housing Corp.

“The impact of low oil prices will hold back employment growth throughout the forecast period to its lowest level since 2010, and migration is forecast to come down from the elevated levels recorded in the last couple of years. This will keep sales and housing starts from making large gains in the coming years,” said Richard Cho, the CMHC’s market analyst in Calgary.

The report, released Monday, said total housing starts in the Calgary region will drop this year by 22.9 per cent from year-ago levels, to 13,200 units. The forecast says they’ll drop a further 12.9 per cent in 2016, to 11,500.

The decline is expected to be more pronounced for the multi-family market. Multi-family starts are expected to drop 29.5 per cent this year to 7,500 units, and another 20 per cent in 2016, to 6,000 units. Single-detached homes are forecast to fall 12.2 per cent this year, to 5,700 units and a further 3.5 per cent in 2016.

Cho said while net migration to Calgary will continue to support demand in the region, “increased economic uncertainty, coupled with rising existing home supply, will slow new home production through 2016.”

“Moderating employment growth, reduced net migration, and increased selection in the existing home market will contribute to the decline in single-detached starts.”

The five-year average for starts in the Calgary region is 12,222 while the 10-year average is 12,308. In recent years, the lowest level was 6,318 in 2009 with the highest level in 2014 at 17,131.

Prices for new, single detached homes are expected to rise this year by 4.7 per cent, to $665,000, and a further 1.1 per cent in 2016 (to $672,000).

But while prices are expected to rise for newly-built homes, resale home prices are expected to fall this year, before rebounding in 2016. CMHC said the average MLS sale price in the Calgary region will drop by 2.7 per cent this year to $448,500. Prices are expected to recover somewhat in 2016, rising 1.1 per cent to $453,000.

MLS sales are forecast to decline by 26.5 per cent this year to 24,700 followed by a 0.8 per cent increase in 2016 to 24,900.

The five-year average for MLS sales in the Calgary region is 26,733 with the 10-year average at 27,845. In recent years, the lowest level was 20,996 in 2010 with the highest levee last year at 33,615.

In the city’s rental market, the vacancy rate is expected to rise through 2016 — from 1.4 per cent in October 2014, to three per cent this October and 3.2 per cent in October 2016. The average rent for a two-bedroom apartment is expected to rise by 0.6 per cent this year to $1,330 and by 0.8 per cent next year to $1,340.

In another report released Monday, the Conference Board of Canada said Calgary’s resale housing market is in “balanced” territory with a sales-to-new listing ratio of 0.651 in April.

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