Local housing supply is far from a ‘glut’

Single-family stock adjusting; condos will take time, Guy Huntingford says

Last week I read everything the Calgary Herald had written about the latest census numbers. Lots to digest, but overall I would categorize this year’s data as good news for a city reeling from a nasty economic downturn.

The numbers suggest we are slowly starting to recover with a slight, positive, inward migration once again.

An article with the headline “Calgary’s housing glut biggest in decades, census figures show” caught my attention.

To be completely transparent about why this headline caused me some breakfast indigestion, readers should know that:

a) I was the publisher of the Herald for more than three years and I understand the power of a headline that grabs the reader’s attention, and:

b) My current role is CEO of BILD Calgary Region, an organization that represents the development and building industry in Calgary.

So what caused the indigestion?

While the reporter did an admirable job of reporting on the census data, I would not have used the term glut to describe where the housing market is today and where the industry sees it going in the future.

A glut suggests a level of inventory that will take a significant amount of time to absorb and may suggest that a moratorium on all new builds would be prudent.

Nothing could be further from the truth. For example, if a new community received council approval today, it would be 2019 or 2020 before the first show home appeared.

The point is that all types of development take time to bring to fruition, so developers and builders do their best to anticipate market conditions and ensure that there is always sufficient supply.

The housing market is complex as it must deal with long lead times to get homes built, different types of homes from apartments to single family, differing demands based on geography (who desires what and in what neighbourhood?), a fluid labour pool for construction and financial obligations that ensure only well-managed companies survive.

Thankfully, Calgary is blessed with many developers and builders who have grown their businesses over decades. They have seen the difficulties that unfortunately have been part of the economic landscape in the city for a long time. They know how to adjust and ensure their businesses will survive and prosper again.

With this in mind, the current inventory is well under control. Yes, there are more apartment-style units available than is optimum, but building large multi-storey projects takes time and many of those buildings were in progress before the wrenching economic downturn hit Calgary. The industry is well on its way to correcting this situation and in the meantime, consumers are benefiting from lower rents and modest price declines for condominiums.

On the other hand, builders of single family, semi and townhome product were able to quickly adapt to the changing market and the current inventory is roughly one year of supply, which is what the market needs to provide choice and affordability for new homebuyers.

So no, a 4.7 per cent vacancy rate for new housing is not a glut. I prefer to call it a very small window of opportunity for new homebuyers to choose from a very healthy inventory, which will quickly find its natural levels again.

To put things in perspective, the real inventory problem is in downtown office space that has really been affected by huge job losses in the last two years and vacancy rates are expected to peak later this year at 30 per cent. This is where our concern should lie.

The housing market is complex as it must deal with long lead times to get homes built …