Housing market to bottom in '09
By Mario Toneguzzi, Calgary Herald
Published: May 19, 2009
CALGARY - Calgary’s housing market is expected to bottom this year and expand in 2010, according to Canada Mortgage and Housing Corp.
In its Spring 2008 Calgary Housing Market Outlook released today, the agency said total housing starts in the Calgary census metropolitan area will plunge by nearly 68 per cent to 3,700 units compared with a year ago - when they were 11,438 units.
But in 2010, the CMHC is forecasting total starts to increase by 13. 5 per cent to 4,200 units “as economic conditions improve and job creation increases demand for housing.”
The report said that in 2008 multi-family starts reached 7,051 units, the highest level since 1981.
“As this large ramp-up in supply was not met by a commensurate increase in demand, multi-family starts are forecasted to drop by 86 per cent in 2009 to 1,000 units,” said the report. “With the economy improving in 2010, there is potential for a modest recovery with multi-family starts projected to rise to 1,200 units.
“The record condominium construction in 2008 has contributed to weaker starts activity in 2009, as an inventory buildup has held back some new construction,” said Lai Sing Louie, senior market analyst in Calgary for the CMHC. “Many of the projects currently under construction will need to be completed and absorbed before we are likely to see an improvement in highrise condominium starts.”
The CMHC said the rebound in single-detached starts previously expected in 2009 will be delayed until the economy expands.
“The economic slowdown experienced during the fourth quarter of 2008 has continued into 2009, causing companies to resize. In the face of full-time job losses and heightened competition from the resale market, single-detached starts will retreat from 4,387 units in 2008 to 2,700 units in 2009 (down 38.5 per cent),” said the CMHC. “Economic expansion and job growth in 2010 will provide a lift to construction and single-detached starts are projected to rise by 11 per cent to 3,000 units.
“Construction in 2010 should represent the beginning of an expansionary phase, but production will be relatively low by historical standards at only about 40 per cent of the average production experienced in the past decade, which was the strongest decade for single starts on record,” said Louie.
The agency also said the recovery in Calgary’s resale housing market has been postponed due to weaker economic growth and a reduced level of demand.
“Weaker economic activity and job losses will reduce resale activity this year,” said the report.
In 2009, residential MLS sales will reach 17,000 units, a projected decrease of 27 per cent from the 23,136 sales in 2008.
“Low mortgage rates and a moderate economic expansion are anticipated in 2010,” said the CMHC. “With full-time job growth supporting demand and prices stabilizing, MLS sales are projected to rise by 10 per cent to 18,700 units in 2010.”
The average MLS sale price is projected to drop by eight per cent in 2009 to $372,000 from $405,267 last year. This will represent the second consecutive year that the average annual price has declined.
“Provided listings continue to move lower and demand improves, prices are expected to stabilize toward the end of this year,” said the report. “As the economy improves in 2010, an up-tick in demand will support balanced market conditions and will lift housing prices by 2.7 per cent to an average of $382,000.”
The average apartment vacancy rate is projected to rise to four per cent by October 2009, almost doubling the rate experienced in October 2008. The rising vacancy rate will also reduce the average two-bedroom rent from $1,148 to $1,075 per month, the first decrease for this average since the early 1990s.
“In 2010, an expanding economy and job growth will support increased household formation and this is expected to lower the vacancy rate to 3.5 per cent,” said the CMHC. “As the vacancy rate begins to tighten, rental rates will move up with the average two-bedroom rent forecasted to rise to $1,100 per month.”
In its Spring 2008 Calgary Housing Market Outlook released today, the agency said total housing starts in the Calgary census metropolitan area will plunge by nearly 68 per cent to 3,700 units compared with a year ago - when they were 11,438 units.
But in 2010, the CMHC is forecasting total starts to increase by 13. 5 per cent to 4,200 units “as economic conditions improve and job creation increases demand for housing.”
The report said that in 2008 multi-family starts reached 7,051 units, the highest level since 1981.
“As this large ramp-up in supply was not met by a commensurate increase in demand, multi-family starts are forecasted to drop by 86 per cent in 2009 to 1,000 units,” said the report. “With the economy improving in 2010, there is potential for a modest recovery with multi-family starts projected to rise to 1,200 units.
“The record condominium construction in 2008 has contributed to weaker starts activity in 2009, as an inventory buildup has held back some new construction,” said Lai Sing Louie, senior market analyst in Calgary for the CMHC. “Many of the projects currently under construction will need to be completed and absorbed before we are likely to see an improvement in highrise condominium starts.”
The CMHC said the rebound in single-detached starts previously expected in 2009 will be delayed until the economy expands.
“The economic slowdown experienced during the fourth quarter of 2008 has continued into 2009, causing companies to resize. In the face of full-time job losses and heightened competition from the resale market, single-detached starts will retreat from 4,387 units in 2008 to 2,700 units in 2009 (down 38.5 per cent),” said the CMHC. “Economic expansion and job growth in 2010 will provide a lift to construction and single-detached starts are projected to rise by 11 per cent to 3,000 units.
“Construction in 2010 should represent the beginning of an expansionary phase, but production will be relatively low by historical standards at only about 40 per cent of the average production experienced in the past decade, which was the strongest decade for single starts on record,” said Louie.
The agency also said the recovery in Calgary’s resale housing market has been postponed due to weaker economic growth and a reduced level of demand.
“Weaker economic activity and job losses will reduce resale activity this year,” said the report.
In 2009, residential MLS sales will reach 17,000 units, a projected decrease of 27 per cent from the 23,136 sales in 2008.
“Low mortgage rates and a moderate economic expansion are anticipated in 2010,” said the CMHC. “With full-time job growth supporting demand and prices stabilizing, MLS sales are projected to rise by 10 per cent to 18,700 units in 2010.”
The average MLS sale price is projected to drop by eight per cent in 2009 to $372,000 from $405,267 last year. This will represent the second consecutive year that the average annual price has declined.
“Provided listings continue to move lower and demand improves, prices are expected to stabilize toward the end of this year,” said the report. “As the economy improves in 2010, an up-tick in demand will support balanced market conditions and will lift housing prices by 2.7 per cent to an average of $382,000.”
The average apartment vacancy rate is projected to rise to four per cent by October 2009, almost doubling the rate experienced in October 2008. The rising vacancy rate will also reduce the average two-bedroom rent from $1,148 to $1,075 per month, the first decrease for this average since the early 1990s.
“In 2010, an expanding economy and job growth will support increased household formation and this is expected to lower the vacancy rate to 3.5 per cent,” said the CMHC. “As the vacancy rate begins to tighten, rental rates will move up with the average two-bedroom rent forecasted to rise to $1,100 per month.”
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