Steady Growth Forecast for Calgary Housing Market

MLS sales and prices to increase in next two years

By Mario Toneguzzi, Calgary Herald

CALGARY — Steady growth is forecast for Calgary’s housing market in the next two years, according to a new report released Monday by Canada Mortgage and Housing Corp.  The agency said MLS sales in the Calgary census metropolitan area will grow to 23,000 transactions in 2012 and to 23,700 in 2013 from 22,466 in 2011.  The CMHC said the average sale price will rise from $402,851 in 2011 to $409,000 in 2012 and $420,000 in 2013.  The optimistic forecast also translates into the new housing market.

The CMHC is predicting housing starts in the Calgary region to jump from 9,292 in 2011 to 10,300 in 2012 and 10,700 in 2013.  “Economic activity in Calgary will continue to support housing demand throughout the forecast period,” said Richard Cho, senior market analyst in Calgary for the CMHC. “Sustained investments in the energy sector will not only create jobs in the energy industry but also promote activity in other industries leading to more employment opportunities for job seekers. Employment levels in Calgary steadily rose in 2011 and the same is expected for 2012. As labour market conditions gradually tighten, we can expect to see higher migration flows to Calgary which is also an important driver for housing demand. In addition, favourable mortgage rates will also contribute to more sales in the new home and resale market.

“More single-detached and multi-family homes are forecast to break ground this year. In the past, elevated active listings in the competing resale market contributed to fewer single-detached starts. However, as the resale market becomes more balanced this year coupled with improving demand, we can expect to see more single-detached homes start construction. Multi-family construction will also pick up this year and next, mainly from higher apartment starts. Apartment inventories have come down from their elevated levels providing some builders an opportunity to start more projects and help satisfy demand.”

In Alberta, the CMHC forecasts housing starts to jump from 25,704 in 2011 to 29,100 in 2012 and 30,000 in 2013.  Provincially, MLS sales are forecast to jump from 53,146 in 2011 to 54,650 in 2012 and 56,550 in 2013. The average MLS sale price will rise from $355,808 in 2011 to $363,650 this year and $372,300 next year.  “Employment opportunities in the Prairies will continue to draw migrants, supporting new housing demand,” said Lai Sing Louie, the CMHC’s regional economist for the Prairie and Territories Region.

The CMHC report said net migration to Alberta is on an upward trend due to economic growth, job creation and low unemployment rates and the 2011 count will almost double 2010’s total of 19,613, which was a 15-year low. The CMHC estimates net migration in 2011 at 38,500 followed by 39,000 in 2012 and 39,500 in 2013.  “Over the forecast period, net migration will be close to the 10-year average with about 40,000 people added each year, increasing housing demand for rental and home ownership,” said the report.  It also said economic expansion is expected to continue supporting rental demand in 2012.  “Investments in the energy sector are promoting economic growth in Calgary, creating jobs and attracting migrants,” said the CMHC. “In addition, rental supply is not anticipated to see any large increases in the near future.”

It said the rental vacancy rate is expected to dip from 1.9 per cent in October 2011 to 1.8 per cent this year and to 1.6 per cent in 2013.  The average two-bedroom apartment rent is expected to rise from $1,084 in 2011 to $1,125 this year and $1,175 in 2013.  Todd Hirsch, senior economist with ATB Financial, said for over two years prices for newly-built homes in Calgary have remained basically unchanged.  He said it reflects stability in the housing market. Also, housing starts and existing home prices have shown similar patterns of stability in recent years.  “Alberta’s rising population and great labour market conditions are boosting housing demand. Yet that may be counter-balanced by the general belief that mortgage rates and prices will remain steady in the coming months. This may be reducing the urgency for potential buyers to jump into the market,” said Hirsch.  “This all suggests a fairly balanced, healthy market. The current stability eases any fears of inventory or price bubbles building — which pose much bigger problems when they burst.”