Almost two years after the last recession, housing market conditions in Alberta continued to favour the buyer, creating downward pressure on housing prices, says a new report released on Tuesday by Canada Mortgage and Housing Corp.
“New home inventory levels in Alberta remained elevated, while the sales-to-new listings ratio in the resale market averaged around 45 per cent in 2018, indicative of a high level of supply relative to demand. Alberta’s housing markets are expected to transition to more balanced conditions over the forecast period. Employment and income are expected to rise and stronger demographic growth will gradually increase housing demand. However, tighter borrowing conditions and rising mortgage rates will provide some headwinds,” said the CMHC Housing Market Outlook.
It said starts in the province will range from a low of 27,400 to a high of 29,700 this year compared with 29,457 in 2017. The range is forecast to be 26,800 to 29,200 in 2019 and 27,500 to 30,100 in 2020.
“In Alberta’s new home market, single-detached inventories have been trending higher in 2018 prompting builders to slow production. On the other hand, multi-family inventory has been trending lower encouraging production but creating a potential risk of an inventory build-up if units under construction are not absorbed. in a timely manner. Overall, total housing starts over the next two years are projected to be relatively stable with some upside in 2020 as inventory levels come down and market balance improves,” said the CMHC.
For the resale market, the agency is forecasting MLS sales this year of between 51,600 to 56,000 compared with 57,211 in 2017. The range is expected to rise in 2019 to between 52,700 and 57,300 and in 2020 to be between 53,600 and 58,400.
The average MLS sale price in Alberta was $398,228. CMHC forecast range is: $387,100 to $390,500 this year; $390,000 to $393,700 in 2019; and $394,000 to $398,600 in 2020.
“MLS sales in Alberta are projected to be lower in 2018 compared to 2017. While economic growth has generated employment gains, full-time employment in Alberta is still recovering from the last oil price shock. Full-time employment has still not returned to the level reached back in 2015. Over the forecast period, expected growth in full-time employment and rising net migration will contribute to the demand or housing. On the other hand, demand will be moderated by rising mortgage rates. Over the next two years, MLS sales in Alberta are expected to be relatively stable and only gradually rise,” said the CMHC.
“Through nine months of 2018, the average MLS price in Alberta was approximately $390,000, down 2.6 per cent from the same period in 2017. Buyers’ market conditions are expected to slowly subside and this will help stabilize housing prices in 2019. Market conditions are not expected to substantially lift the average MLS price in 2020 and price growth will continue to be relatively flat.”
The report said the vacancy rate in Alberta expected to gradually decline over the forecast period, with the exception of oil-sands-driven economies such as Wood Buffalo and Cold Lake, where vacancy rates are expected to remain elevated.
“Net interprovincial migration is turning positive and these new households will help lower the vacancy rate in Alberta. However, outflows from rental tenure to homeownership will continue to create vacancies. Rental incentives in the marketplace are expected to gradually decline over the forecast period. The average rent in Alberta is projected to stabilize in 2018 with rent increases likely below the rate of inflation in 2019 and 2020,” added the report.
The provincial vacancy rate which was 6.7 per cent in 2017 is expected to fall to 5.9 per cent this year, to 5.1 per cent in 2019 and to 4.9 per cent in 2020.
Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.