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December 01, 2015

CMHC Fall forecast

Calgary housing starts to decline in 2015 and 2016 but rise slightly in 2017

Jim Zang

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According to Canada Mortgage and Housing Corporation’s (CMHC) Fall 2015 Calgary Housing Market Outlook released October 26, total housing starts in the Calgary Census Metropolitan Area (CMA) are forecast to decline to 11,900 units in 2015 and 10,000 in 2016 before increasing slightly to 10,200 in 2017.

“The impact of lower oil prices on Calgary’s labour market and consumer confidence, combined with a well-supplied resale market will reduce new home construction in 2015 and 2016,” said Richard Cho, CMHC’s Principal, Market Analysis for Calgary. “In 2017, total housing starts are forecast to increase slightly with support provided by gradual improvements in job creation, income growth and net migration,” he added.

New construction of single-detached homes in 2015 and 2016 is forecast to reach its lowest level since 1988 with 4,000 starts per year. “Employment growth in 2015 has slowed and will also be muted in 2016 as job losses are expected in the early months of the year. Migration will also decline as the region continues to face an elevated unemployment rate,” said Cho. Economic conditions are anticipated to improve in the second half of 2016 and into 2017. Single-detached starts are forecast to rise three per cent to 4,100 in 2017.

Following a record high of 10,637 units in 2014, multi-family starts are forecast to decline to 7,900 units in 2015 and 6,000 units in 2016. An increase in inventories, a rise in rental vacancy rates and competition from the resale market will moderate multi-family starts. In 2017, multi-family construction is forecast to increase to 6,100 units as economic conditions improve.

MLS® residential sales in Calgary are forecast to decline 28 per cent to 24,300 in 2015, after reaching a record high of 33,615 units in 2014. A sharp rebound in sales is not expected for 2016 as employment growth will be particularly weak in the first few months before posting some gains later in the year. Confidence in the economy and housing markets will gradually improve through to 2017 as economic activity gains ground and employment increases. Although mortgage rates are expected to rise, they will still remain historically low, and the anticipation of higher rates may also move some buyers off the fence. Sales are forecast to rise 1.6 per cent to 24,700 units in 2016 and increase two per cent to 25,200 units in 2017.

The average MLS® residential price is forecast to ri rise by less than one per cent in 2016 to $454,000, and increase two per cent to $463,000 in 2017.

THE BIG PICTURE
Experts point to 2017 as the rebound year

CMHC’s regional forecast also projects housing starts across the Prairies to decrease to 48,600 in 2015 and move lower to range between 32,900 and 49,500 in 2016 before moving higher to range between 32,600 and 51,200 in 2017. Housing starts will decline in all three Prairie provinces in 2015. In 2016, housing starts will continue to decline in Alberta but stabilize in Saskatchewan and Manitoba. By 2017, increased new construction in expected in all three Prairie provinces. “The economic and housing market outlook for the Prairie region continues to be adversely impacted by low commodity prices,” said Lai Sing Louie, CMHC’s Regional Economist. “Lower oil prices have created economic uncertainty in Alberta and Saskatchewan. This will hold back growth in housing starts in both of these provinces in 2015 and 2016 before improving economic conditions provide some gains in 2017.”

In Alberta, housing starts in 2015 are projected to reach 37,200, about an eight per cent decline from 2014. In 2016, housing starts are expected to decline further, and range between 23,700 and 35,900 before gradually rising in 2017 to range between 23,400 and 37,200. In Saskatchewan, a projected decline of 30 per cent in 2015 will take housing starts to 5,800 total units. This will lead to a stabilization of activity as starts in Saskatchewan are expected range between 4,600 and 7,000 in 2016 and between 4,600 and 7,200 in 2017. In Manitoba, housing starts are forecasted to decline in 2015 to 5,600 units and remain relatively stable and range between 4,600 and 6,600 in 2016 and 4,600 to 6,800 in 2017.

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