Glut of unsold units to slow housing starts in Calgary through 2020, CMHC predicts

Housing starts will remain flat in Calgary for the next two years because of a high level of available homes on the market, according to a report by the Canada Mortgage and Housing Corporation (CMHC).

The surplus inventory is largely due to unsold apartment units, which account for half of all the inventory in Calgary, said the report released on Tuesday.

In September, there were 2,087 unsold homeowner and condominium units in Calgary, CMHC says.

The report predicts opposing forces will push and pull the demand for housing in Calgary over the next two years.

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"On aggregate, it is anticipated that Calgary's economy will experience stronger growth in population and employment. This will help support demand and lift sales in 2019 and 2020," said the report.

"However, the average MLSprice will continue facing downwards pressure, but is expected to stabilize in 2019 and modestly rise in 2020."

At the moment, CMHC says it remains a buyer's market for homes in Calgary.

"Active listings in Calgary's resale market have been trending higher, while MLS sales have been lower due to relatively weaker economic fundamentals in the market," the report said.

"On a year-to-date basis, MLS sales have decreased 13.5 per cent from September 2017."

CMHC says employment growth and the continued net positive interprovincial and international migration will drive the demand for rentals in Calgary in the next two years.

Vacancy rates are expected to dip through 2020, but competition from the secondary rental market will keep vacancy rates from declining faster, the report said.

National situation moderating

CMHC says the national real estate market is expected to moderate over the next two years as the growth in housing prices is expected to slow to more in line with economic fundamentals.

The national housing agency said housing starts and sales are both expected to decline in 2019 and 2020.

It predicts housing starts for single- and multi-unit starts will fall to between 193,700 and 204,500 in 2019, while sales are anticipated to be between 478,400 and 497,400 units. Prices are anticipated to range between $501,400 and $521,600.

CMHC says it expects economic indicators like income and employment to continue to help support demand for housing starts, but these fundamentals are anticipated to slow down to a more sustainable pace.

Rising mortgage rates are also expected to affect housing demand and the resale market.

By 2020, CMHC anticipates demand will continue to shift toward relatively less expensive housing options like apartment condominiums versus higher-end single-detached homes.

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