Stronger in-migration into the Calgary area will fuel housing demand and result in gains in MLS ales over the next two years, says the Housing Market Outlook report released by Canada Mortgage and Housing Corporation.
Supported by strong population growth, the pace of new home construction is projected to gain traction in 2020 and 2021 after a slight decline in activity in 2019 and rental vacancy rates will trend lower through 2021, while average 2-bedroom rents will increase modestly, said the report.
“Sales of existing homes have remained subdued in the first eight months of 2019, keeping pace with the same period in 2018, as the market was still feeling the effects of lower oil prices and financial market volatility in the latter half of 2018 and early 2019,” said the CMHC. “Since then the price of oil has increased, labour market conditions have made a strong comeback and population growth has continued to make positive gains, particularly as net-interprovincial migration into Alberta has grown more firmly positive over the past year. Net interprovincial migration into Alberta is correlated with gains in employment in the Calgary area. Given continued gains in employment projected for 2020-21, this positive trend is anticipated to remain.
“Strong employment gains in the first 8 months of 2019 led by gains in the service sector, particularly full-time employment, will be supportive of housing demand in the latter half of 2019 and over the forecast horizon. Overall, we expect these positive shifts in fundamentals in the area to lead to some recovery in MLS sales in both 2020 and 2021, with the pace of sales approaching what was seen between 2011 and 2012.
“Improving fundamentals and modest improvements in MLS sales going forward will also support a shift in the direction of resale prices. After declining since the latter half of 2018, resale prices are set to stabilize in the latter half of 2019 before seeing modest increases in 2020 and 2021 . This will largely be the result of continued declines in available inventory in the existing home market, along with the new home market, as the market shifts slowly from buyers’ conditions to more balanced conditions.”
The Calgary region had 23,869 MLS sales in 2017 then dipped to 20,534 last year. This year sales are forecast to end the year in the 20,700 to 21,500 range. For 2020, the CMHC is forecasting sales of between 21,400 to 25,000 while in 2021 the forecast is for 21,600 to 25,800.
The average MLS sale price which was $466,259 in 2017 dipped to $460,619 last year and the CMHC said it is expected to end 2019 between $429,200 and $438,800. In 2020, the range is expected to be between $430,500 and $443,900 and in 2021 between $431,800 and $451,600.
“While economic and demographic fundamentals are expected to strengthen over the forecast horizon, total housing starts are expected to moderate in 2019 relative to 2018. This is largely a product of the market volatility previously mentioned along with elevated inventories of completed and unsold homes that will need to be absorbed at a faster pace before builders embark on more projects,” said the report.
“Over the next two years, improving fundamentals are projected to lead to modest increases in new construction as the inventory of unsold homes is drawn down. In the single-detached segment, new construction is anticipated to pick up modestly over the next two years as stronger population growth and demographics support new household formation. The multi-unit segment is also expected to see increases in new construction in order to support demand for lower-priced housing options in favourable locations, particularly as available rental options begin to become less abundant. In this regard, there has already been a pickup in demand for multi-unit housing in the latter half of 2019 in both the resale and new home markets as these represent more affordable options for first-time buyers.”
The region had 11,534 total housing starts in 2017 followed by 10,971 last year. This year CMHC is forecasting total starts between 9,300 and 9,900 then in 2020 between 10,100 and 11,900 and followed in 2021 between 10,500 and 12,300.
The October rental vacancy rate in the Calgary area was 6.3 per cent in 2017 then fell to 3.9 per cent last year. This year CMHC said it was expected to be 3.6 per cent followed by declines to 3.2 per cent in 2020 and to 2.8 per cent in 2021.