Housing starts slowing, helping inventory
Housing starts are slowing in the city, and that’s good news for the market.
Starts fell four per cent last month from August the year before, based on data from Canada Mortgage and Housing Corp.
“We’ve seen that housing starts have slowed significantly in the area, and this is mostly from developers and builders responding well to elevated inventory levels,” says Heather Boyer, senior analyst for economics at CMHC.
Single-detached home starts fell by more 16 per cent, down from 403 in August 2018 to 337 last month.
However, starts for all other segments rose by three per cent compared to the same month last year (693 in 2018 versus 714 last month).
Boyer notes the rise is driven by a “bit of overbuilding” in the apartment segment in part because it is a little slower to respond to high inventories. It may also indicate builders see affordability as a driving factor and therefore they are now building more townhouse-style product.
Indeed, CMHC data show row starts rose last month to
119 from 104 units the same month last year.
This in-between segment is typically more pricey than apartment-style units, but they are less costly than single-detached while offering many of its benefits like a small yard and front-street door. CMHC information further supports this shift in the market, revealing that more than 90 per cent of unabsorbed single-detached units are priced at more than $400,000.
High inventories persist in Calgary across most segments. Although 586 single-family homes were available on the market last month, more than 1,400 multi-family units — which includes apartment, row and semi-detached — were available for sale.
“The bulk of inventories are on the apartment side in Calgary,” Boyer says, adding inventories are generally very high compared with longterm average levels.
The current conditions offer buyers plenty of options due to competition from the resale side as well.
“There are definitely lots of options for buyers whether it’s in single-detached homes or condominium apartments,” Boyer says.
“In the resale market, we’re still seeing a bit of buyers’ market conditions.”
She adds prices in the resale continue to fall year over year.
“With the downward pressure on prices, it’s tougher for sellers who don’t have the same leeway as buyers to negotiate,” she says. “It’s also not a very quick market in the sense that some properties are sitting on the market longer.”
Yet Boyer notes the market could be moving more toward balance as economic indicators improve, including employment. Unemployment may have jumped in August to
7.3 per cent in Calgary from July (6.9 per cent). But the number of employed people in the city increased last month by 6.7 per cent compared with the same month in 2018.
Additionally, the number of unemployed fell by 4.7 per cent in August, year over year, based on the same Statistics Canada data.
“Compared with previous years, we’re seeing improvement in employment levels,” Boyer says. “So the fundamentals behind housing demand are starting to strengthen.”