Calgary housing market forecast brightens modestly over next two years

Thursday, October 24, 2019   /   by Sergey Korostensky

Calgary housing market forecast brightens modestly over next two years

A population influx and more jobs should lift Calgary’s slumping housing market to moderate gains over the next two years, according to a federal forecast.

While the recovery won’t be anything near the pre-2015 boom days, an increase in employment that’s attracting more people to the city should mean a rebound in housing starts and resales, said Taylor Pardy of Canada Mortgage and Housing Corp. (CMHC).

“Since 2018, we’ve seen interprovincial migration go positive and we’re seeing some strong employment gains,” said Pardy.

“Going into 2020, we should see some improvements.”

In 2018, single-detached home housing starts reached 3,791, a number that could hit as high as 4,400 next year and 4,900 in 2021, states the CMHC.

The figure for new multiple-family homes — condos, duplexes — could tick up by 200 to 300 from the 7,180 units built in 2018, says the report.

But that growth will remain checked by high inventories in both the new and resale home markets, said Pardy.

“It’s going to take some time to get through that,” he said.

MLS sales that came in at 20,354 are forecast to reach up to 21,500 next year and as high as 25,800 in 2021, said Pardy.

That outlook is being driven by a growth in Calgary job numbers, a gain of 50,000 over the past year, he said.

“That’s a six per cent gain, that’s very strong and the vast majority of those have been full-time jobs,” said Pardy.

“That’s very positive in getting people into housing.”

Most of the employment gains have been in the service sector, but also in scientific and tech-related positions, a sign of diversification badly needed while the energy sector continues to shed jobs, he said.

Statistics Canada says both foreign and interprovincial migration to Alberta has recently picked up for the first time since 2014, when the energy industry was flying high before crashing later that year.

Most of that influx naturally heads to the province’s larger centres, stimulating the housing market, said Pardy.

“Economic diversity in Calgary is much greater than smaller centres,” he said.

But that still relatively sluggish economy is holding back average resale prices, which, at $460,619 for a single-detached home last year, is forecast to be $451,600 by 2021.

But that’s an improvement over the $438,800 average predicted for this year, said Pardy.

“They seem to be plateauing but we still have larger inventories,” he said.

The local economy could be transitioning to an employment growth at a pay grade lower than during the oil and gas heydays, which is reflected in housing market trends, said Ann-Marie Lurie, chief economist with the Calgary Real Estate Board.

“We’re moving into almost the new normal, we need something to shift in our economy to get that big boost,” she said.

“Where we’re seeing improvements in the housing market is in the lower end, below $500,000.”

Any improvements owe more to shrinking supply than increasing demand, said Lurie.

And she noted, the lion’s share of newcomers to Calgary come from foreign sources, which has less effect on the new housing side.

“Those are not translating into ownership demand as quickly,” she said.

Currently, the average price of single-detached homes is seven per cent below 2014 levels, with multi-family homes 15 per cent below their value five-and-a-half years ago, said Lurie.

Another factor buoying the market slightly, she said, is a reduced rental vacancy rate.

Lurie said there’s a risk that austerity coming in the provincial budget could negatively affect the housing sector with job cuts or freezes.

“Most of the job growth has been generated by education, health care and the public administration domains,” she said.